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Ownership Structure, Sharing of Control and Legal Framework: international evidence
Author(s) -
LópezdeForonda Óscar,
LópezIturriaga Félix J.,
SantamaríaMariscal Marcos
Publication year - 2007
Publication title -
corporate governance: an international review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.866
H-Index - 85
eISSN - 1467-8683
pISSN - 0964-8410
DOI - 10.1111/j.1467-8683.2007.00636.x
Subject(s) - shareholder , private benefits of control , business , sample (material) , control (management) , corporate governance , accounting , differential (mechanical device) , capital (architecture) , order (exchange) , finance , economics , history , chemistry , management , archaeology , chromatography , engineering , aerospace engineering
We analyse the relation between capital structure, ownership structure, and corporate value for a sample of 1,216 firms from 15 European countries. Our results stress two different conflicts of interest and show the differential role played by the mechanisms of corporate control depending on the legal and institutional environment. In common law countries, as a consequence of the relationships between managers and shareholders, capital structure and managerial ownership are the most effective mechanisms of control. In civil law countries, however, as a consequence of the conflicts between majority and minority shareholders, the ownership concentration and the sharing of control within the firm become crucial. In this scenario, the second reference shareholder plays a critical role in contesting the control of the dominant largest shareholder in order to reduce the extraction of private benefits and improve the firm's performance.