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Cross-Ownership: A Device for Management Entrenchment?

Author

Listed:
  • Marc Levy
  • Ariane Szafarz

Abstract

By artificially inflating capital and creating own shares, cross-ownership can be a key device for managerial entrenchment. This paper proposes a game-theoretical method to measure the extent of shareholder expropriation through cross-ownership. By properly accounting for cross-ownership linkages, we show how managers can seize indirect voting rights, and so insulate their firms from outside control. Significant examples of cross-ownership are found not only in civil law countries, but also in the U.S. mutual fund industry. We apply our method to Germany’s Allianz Group. This paper paves the way to better regulatory appraisal of management entrenchment through cross-ownership.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Marc Levy & Ariane Szafarz, 2017. "Cross-Ownership: A Device for Management Entrenchment?," ULB Institutional Repository 2013/239878, ULB -- Universite Libre de Bruxelles.
    • Handle: RePEc:ulb:ulbeco:2013/239878
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    Cited by:

    1. Federica Ricca & Andrea Scozzari, 2026. "A reduced Mason’s rule for solving linear systems of equations recursively: an application to the integrated ownership problem in a network of companies," Annals of Operations Research, Springer, vol. 357(2), pages 1135-1164, February.
    2. Peng Xu & Heng Zhang & Guiyu Bai, 2019. "Research on the Differentiated Impact Mechanism of Parent Company Shareholding and Managerial Ownership on Subsidiary Responsive Innovation: Empirical Analysis Based on ‘Principal–Agent’ Framework," Sustainability, MDPI, vol. 11(19), pages 1-17, September.

    More about this item

    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
    • C71 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Cooperative Games
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • C44 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Operations Research; Statistical Decision Theory
    • D74 - Microeconomics - - Analysis of Collective Decision-Making - - - Conflict; Conflict Resolution; Alliances; Revolutions

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