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Investor Protections and Concentrated Ownership: Assessing Corporate Control Mechanisms in the Netherlands

Author

Listed:
  • Chirinko Robert

    (CESifo,Munich, Germany)

  • Garretsen Harry

    (CESifo,Munich, Germany)

  • Ees Hans van

    (University of Groningen,Groningen, Netherlands)

  • Sterken Elmer

    (CESifo,Munich, Germany)

Abstract

The Berle-Means problem - information and incentive asymmetries disrupting relations between knowledgeable managers and remote investors - has remained a durable issue engaging researchers since the 1930s. However, the Berle- Means paradigm - widely dispersed, helpless investors facing strong, entrenched managers - is under stress in the wake of the cross-country evidence presented by La Porta, Lopez-de-Silanes, Shleifer and Vishny, and their legal approach to corporate control. This paper continues to investigate the roles of investor protections and concentrated ownership by examining firm behaviour in the Netherlands. Our within-country analysis generates two key results. First, the role of investor protections emphasized in the legal approach is not sustained. Rather, firm performance is enhanced when the firm is freed of equity market constraints. Second, ownership concentration does not have a discernible impact on firm performance, which may reflect large shareholders’ dual role in lowering the costs of managerial agency problems but raising the agency costs of expropriation.

Suggested Citation

  • Chirinko Robert & Garretsen Harry & Ees Hans van & Sterken Elmer, 2004. "Investor Protections and Concentrated Ownership: Assessing Corporate Control Mechanisms in the Netherlands," German Economic Review, De Gruyter, vol. 5(2), pages 119-138, May.
    • Handle: RePEc:bpj:germec:v:5:y:2004:i:2:p:119-138
    DOI: 10.1111/j.1465-6485.2004.00098.x
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    Cited by:

    1. Ilhan-Nas, Tulay & Okan, Tarhan & Tatoglu, Ekrem & Demirbag, Mehmet & Glaister, Keith W., 2018. "The effects of ownership concentration and institutional distance on the foreign entry ownership strategy of Turkish MNEs," Journal of Business Research, Elsevier, vol. 93(C), pages 173-183.
    2. Degryse, Hans & de Jong, Abe, 2006. "Investment and internal finance: Asymmetric information or managerial discretion?," International Journal of Industrial Organization, Elsevier, vol. 24(1), pages 125-147, January.
    3. Ciaran Driver & Maria João Coelho Guedes, 2017. "R&D and CEO departure date: do financial incentives make CEOs more opportunistic?," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 26(5), pages 801-820.
    4. de Jong, Abe & DeJong, Douglas V. & Mertens, Gerard & Wasley, Charles E., 2005. "The role of self-regulation in corporate governance: evidence and implications from The Netherlands," Journal of Corporate Finance, Elsevier, vol. 11(3), pages 473-503, June.
    5. Weiß, Christian, 2010. "The Ownership Concentration of Firms: Three Essays on the Determinants and Effects," EconStor Theses, ZBW - Leibniz Information Centre for Economics, number 30247.

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    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General

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