The Trade-Off between Risk and Control in Corporate Ownership
This paper analyses the risk-control trade-off in corporate ownership. It presents a simple model in which large shareholders decide their share depending on their risk aversion, risk-neutral effects attached to firm size, and the effectiveness of different (external and internal) mechanisms for controlling managers' behaviour. Two institutional settings in which the expected benefits from control appear to overcome risk aspects are explored: the U.S. at the turn of the twentieth century and Spain in the 1990s. The empirical evidence seems to support the predictions of the model regarding the relationship between ownership concentration, the characteristics of governance, and the size of the firm.
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Volume (Year): 160 (2004)
Issue (Month): 2 (June)
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References listed on IDEAS
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- Anup Agrawal & Charles R. Knoeber, "undated". "Firm Performance and Mechanisms to Control Agency Problems between Managers and Shareholders (Revision of 29-94)," Rodney L. White Center for Financial Research Working Papers 8-96, Wharton School Rodney L. White Center for Financial Research.
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