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Cross-Ownership: A Device for Management Entrenchment?

Listed author(s):
  • Marc Levy
  • Ariane Szafarz

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.

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Paper provided by ULB -- Universite Libre de Bruxelles in its series ULB Institutional Repository with number 2013/239878.

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Date of creation: 2016
Publication status: Forthcoming
Handle: RePEc:ulb:ulbeco:2013/239878
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Web page: http://difusion.ulb.ac.be

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