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Ownership concentration and corporate governance practices: substitution or expropriation effects?
Author(s) -
Bozec Yves,
Bozec Richard
Publication year - 2007
Publication title -
canadian journal of administrative sciences / revue canadienne des sciences de l'administration
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.347
H-Index - 48
eISSN - 1936-4490
pISSN - 0825-0383
DOI - 10.1002/cjas.23
Subject(s) - expropriation , corporate governance , stock exchange , shareholder , argument (complex analysis) , business , accounting , incentive , context (archaeology) , order (exchange) , index (typography) , monetary economics , economics , microeconomics , market economy , finance , paleontology , biochemistry , chemistry , world wide web , computer science , biology
The objective of this study is to analyze the relation between ownership concentration and corporate governance practices of a group of Canadian companies listed on the Toronto Stock Exchange. We rely on the corporate governance index developed by the Report on Business (ROB) in 2002. Our empirical results are consistent with the expropriation effect argument that predicts a negative relation between deviation from the one share‐one vote rule and corporate governance best practices. In this context, the dominant shareholder has incentives to maintain weak internal controls in order to facilitate expropriation. In addition, consistent with prior research, our results give partial support to the substitution effect argument by showing a negative impact of ownership concentration on the board composition subindex. Copyright © 2007 ASAC. Published by John Wiley & Sons, Ltd.