Controlling Shareholders and Firm Value
We study the relationship between firm value and ownership concentration in a market where firms are controlled by large shareholders. We set up an equilibrium model with private benefits of control and bargaining between large shareholders. With simulated data from the model we are able to match approximately the value-concentration relationship observed among Chilean firms in 1990-2009. The model also delivers novel predictions regarding the relationship between investor protection and: (1) the identity of the controlling shareholder (e.g., founder or outside investor), (2) the frequency of productivity-decreasing transfers of control, and (3) the separation between direct ownership and cash-flow ownership.
|Date of creation:||2012|
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