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Cross-Ownership Among Firms: Some Determinants of the Separation of Ownership from Control

Author

Listed:
  • Ritzberger, Klaus

    (Institute for Advanced Studies, Vienna)

  • Shorish, Jamsheed

    (Institute for Advanced Studies, Vienna)

Abstract

This paper demonstrates that the current literature on cross-ownership among firms underestimates the true degree of separation between cash flow rights and voting rights. We use accounting identities to define coefficients of control, such that any (direct or indirect) control of a firm may be identified using these coefficients. This procedure is sufficient to show that under cross-ownership the voting rights associated with ownership are typically underestimated. We demonstrate by example that control and ownership of dividend rights may be entirely separated, and that multiple equilibria may exist in economies with cross ownership.

Suggested Citation

  • Ritzberger, Klaus & Shorish, Jamsheed, 2002. "Cross-Ownership Among Firms: Some Determinants of the Separation of Ownership from Control," Economics Series 113, Institute for Advanced Studies.
    • Handle: RePEc:ihs:ihsesp:113
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    File URL: https://irihs.ihs.ac.at/id/eprint/1415
    File Function: First version, 2002
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    References listed on IDEAS

    as
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    5. 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.
    6. Faccio, Mara & Lang, Larry H. P., 2002. "The ultimate ownership of Western European corporations," Journal of Financial Economics, Elsevier, vol. 65(3), pages 365-395, September.
    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.
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    Cited by:

    1. Tom Fischer, 2014. "No-Arbitrage Pricing Under Systemic Risk: Accounting For Cross-Ownership," Mathematical Finance, Wiley Blackwell, vol. 24(1), pages 97-124, January.
    2. Marc Levy & Ariane Szafarz, 2017. "Cross-Ownership: A Device for Management Entrenchment?," Review of Finance, European Finance Association, vol. 21(4), pages 1675-1699.
    3. Tom Fischer, 2010. "No-arbitrage pricing under cross-ownership," Papers 1005.0768, arXiv.org.

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    More about this item

    Keywords

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    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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