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Ownership structure and the separation of voting and cash flow rights-evidence from Switzerland


  • Markus Schmid


This article analyses the relation between a firm's equity capital structure, managerial and outside block ownership, and firm value based on a unique and hand-collected sample of 545 observations on 174 Swiss firms over the period from 2002 to 2005. While previous papers concentrate either on managerial ownership or on blockholdings, which can, but need not be, managerial, this article distinguishes between the two and investigates their relative importance. This distinction turns out to be important. I find the probability that a firm has a dual-class structure to be positively related to managerial ownership, the ownership of the single largest shareholder, and inside blockholders more generally while negatively related to the ownership of 'true' outside blockholders such as listed companies, mutual and pension funds. Moreover, I present strong evidence that the aim of the dual-class structure is to secure the largest shareholder's and, more specifically, inside blockholders' control over the firm. Most importantly, I find evidence that these inside controlling shareholders take advantage of the dual-class structure by extracting private benefits of control.

Suggested Citation

  • Markus Schmid, 2009. "Ownership structure and the separation of voting and cash flow rights-evidence from Switzerland," Applied Financial Economics, Taylor & Francis Journals, vol. 19(18), pages 1453-1476.
  • Handle: RePEc:taf:apfiec:v:19:y:2009:i:18:p:1453-1476
    DOI: 10.1080/09603100902984350

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    References listed on IDEAS

    1. Lucian Arye Bebchuk, 1999. "A Rent-Protection Theory of Corporate Ownership and Control," NBER Working Papers 7203, National Bureau of Economic Research, Inc.
    2. Pajuste, Anete, 2005. "Determinants and consequences of the unification of dual-class shares," Working Paper Series 465, European Central Bank.
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    Cited by:

    1. Karin Niehoff, 2016. "Price Discovery in Voting and Non-Voting Stocks," Schmalenbach Business Review, Springer;Schmalenbach-Gesellschaft, vol. 17(3), pages 285-307, December.
    2. Li, Ting & Zaiats, Nataliya, 2017. "Information environment and earnings management of dual class firms around the world," Journal of Banking & Finance, Elsevier, vol. 74(C), pages 1-23.
    3. Chiraz Ben Ali, 2014. "Corporate Governance, Principal-Principal Agency Conflicts, and Disclosure," Working Papers 2014-125, Department of Research, Ipag Business School.
    4. Bigelli, Marco & Croci, Ettore, 2013. "Dividend privileges and the value of voting rights: Evidence from Italy," Journal of Empirical Finance, Elsevier, vol. 24(C), pages 94-107.

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