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Creating Value by Changing the Old Guard: The Impact of Controlling Shareholder Heterogeneity on Firm Performance and Corporate Policies

Published online by Cambridge University Press:  31 January 2014

Hua Deng
Affiliation:
[email protected], College of Business and Economics, Australian National University, Canberra, ACT 0200, Australia;
Fariborz Moshirian
Affiliation:
Peter Kien Pham
Affiliation:
peter.pham@unsw .edu.au,
Jason Zein
Affiliation:
[email protected], Australian School of Business, University of New South Wales, Sydney, NSW 2052, Australia.

Abstract

Theory suggests that controlling shareholders can influence firm value through both shared benefits creation and private benefits consumption. Using negotiated control-block transfers from 31 countries, we look beyond ownership concentration and investigate how controlling shareholder heterogeneity influences the relative importance of these two effects. We document that a control transfer precipitates positive firm outcomes particularly when the vendor has maintained control over an extended period and the acquirer displays a strong incentive to engage in restructuring. In such cases, we observe a sustained positive price reaction, more focused corporate investments, lower leverage, higher operating efficiency, and superior long-term performance.

Type
Research Articles
Copyright
Copyright © Michael G. Foster School of Business, University of Washington 2013 

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