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Expropriation of Minority Shareholders in East Asia

  • Claessens, Stijn
  • Djankov^, Simeon
  • Fan, Joseph P.H.
  • Lang, Larry H.P.

We examine the evidence on expropriation of minority shareholders by the controlling shareholder in publicly traded companies in nine East Asian countries. Higher cash-flow rights are associated with higher market valuation. In contrast, higher control rights have an insignificant or negative effect on corporate valuation. Deviations of voting from cash-flow rights through the use of pyramiding, cross-holdings, and dual-class shares, are associated with lower market values. Results are robust to the time period we study, splitting the sample by individual countries, using alternative measures of the incentive for expropriation, and using alternative measures for firm valuation. We conclude that the risk of expropriation is the major principal-agent problem for public corporations in East Asia.

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File URL: http://hermes-ir.lib.hit-u.ac.jp/rs/bitstream/10086/13966/1/wp2000-4a.pdf
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Paper provided by Center for Economic Institutions, Institute of Economic Research, Hitotsubashi University in its series CEI Working Paper Series with number 2000-4.

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Length: 55 p.
Date of creation: Jul 2000
Date of revision:
Handle: RePEc:hit:hitcei:2000-4
Note: This draft: July 2000
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  1. repec:ner:tilbur:urn:nbn:nl:ui:12-86729 is not listed on IDEAS
  2. Randall Morck & Masao Nakamura, 1999. "Banks and Corporate Control in Japan," Journal of Finance, American Finance Association, vol. 54(1), pages 319-339, 02.
  3. Lucian Arye Bebchuk, 1999. "A Rent-Protection Theory of Corporate Ownership and Control," NBER Working Papers 7203, National Bureau of Economic Research, Inc.
  4. McConnell, John J. & Servaes, Henri, 1990. "Additional evidence on equity ownership and corporate value," Journal of Financial Economics, Elsevier, vol. 27(2), pages 595-612, October.
  5. Randall Morck & David Stangeland & Bernard Yeung, 2000. "Inherited Wealth, Corporate Control, and Economic Growth The Canadian Disease?," NBER Chapters, in: Concentrated Corporate Ownership, pages 319-372 National Bureau of Economic Research, Inc.
  6. Lucian Bebchuk & Reinier Kraakman & George Triantis, 1999. "Stock Pyramids, Cross-Ownership, and the Dual Class Equity: The Creation and Agency Costs of Seperating Control from Cash Flow Rights," NBER Working Papers 6951, National Bureau of Economic Research, Inc.
  7. Claessens, Stijn & Djankov, Simeon & Lang, Larry H. P., 2000. "The separation of ownership and control in East Asian Corporations," Journal of Financial Economics, Elsevier, vol. 58(1-2), pages 81-112.
  8. Ariane Chapelle & Marco Becht, 1997. "Ownership and control in Belgium," ULB Institutional Repository 2013/9979, ULB -- Universite Libre de Bruxelles.
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