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Spending Less Time with the Family: The Decline of Family Ownership in the UK

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  • Julian Franks
  • Colin Mayer
  • Stefano Rossi

Abstract

Family ownership was rapidly diluted in the twentieth century in Britain. Issuance of equity in the process of acquisitions was the main cause. In the first half of the century, it occurred in the absence of minority investor protection and relied on directors of target firms protecting the interests of shareholders. Families were able to retain control by occupying a disproportionate number of seats on the boards of firms. However, in the absence of large stakes, the rise of hostile takeovers and institutional shareholders made it increasingly difficult for families to maintain control without challenge. Potential targets attempted to protect themselves through dual class shares and strategic share blocks but these were dismantled in response to opposition by institutional shareholders and the London Stock Exchange. The result was a regulated market in corporate control and a capital market that looked very different from its European counterparts. Thus, while acquisitions facilitated the growth of family controlled firms in the first half of the century, they also diluted their ownership and ultimately their control in the second half.

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Bibliographic Info

Paper provided by Oxford Financial Research Centre in its series OFRC Working Papers Series with number 2003fe15.

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Date of creation: 2003
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Handle: RePEc:sbs:wpsefe:2003fe15

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  1. Raghuram G. Rajan & Luigi Zingales, 2001. "The Great Reversals: The Politics of Financial Development in the 20th Century," NBER Working Papers 8178, National Bureau of Economic Research, Inc.
  2. Franks, Julian & Mayer, Colin, 1996. "Hostile takeovers and the correction of managerial failure," Journal of Financial Economics, Elsevier, vol. 40(1), pages 163-181, January.
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Cited by:
  1. Goergen, M. & Martynova, M. & Renneboog, L.D.R., 2005. "Corporate Governance Convergence: Evidence from Takeover Regulation Reforms in Europe," Discussion Paper 2005-017, Tilburg University, Tilburg Law and Economic Center.
  2. Lazonick, William, 2006. "Corporate Governance, Innovative Enterprise, and Economic Development," Working Paper Series RP2006/71, World Institute for Development Economic Research (UNU-WIDER).
  3. Mehrotra, Vikas & Morck, Randall & Shim, Jungwook & Wiwattanakantang, Yupana, 2013. "Adoptive expectations: Rising sons in Japanese family firms," Journal of Financial Economics, Elsevier, vol. 108(3), pages 840-854.
  4. Naomi Lamoreaux & Jean-Laurent Rosenthal, 2004. "Corporate Governance and the Plight of Minority Shareholders in the United States Before the Great Depression," NBER Working Papers 10900, National Bureau of Economic Research, Inc.
  5. Yoser Gadhoum, 2006. "Power of Ultimate Controlling Owners: A Survey of Canadian Landscape," Journal of Management and Governance, Springer, vol. 10(2), pages 179-204, 05.
  6. Cull, Robert & Davis, Lance E. & Lamoreaux, Naomi R. & Rosenthal, Jean-Laurent, 2006. "Historical financing of small- and medium-size enterprises," Journal of Banking & Finance, Elsevier, vol. 30(11), pages 3017-3042, November.
  7. Santella, Paolo & Baffi, Enrico & Drago, Carlo & Lattuca, Dino, 2008. "A Comparative Analysis of the Legal Obstacles to Institutional Investor Activism in Europe and in the US," MPRA Paper 8929, University Library of Munich, Germany.

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