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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 ,
Fariborz Moshirian ,
Peter Kien Pham  and
Jason Zein
Hua Deng
Affiliation:
hua.deng@anu.edu.au, College of Business and Economics, Australian National University, Canberra, ACT 0200, Australia;
Fariborz Moshirian
Affiliation:
f.moshirian@unsw.edu.au,
Peter Kien Pham
Affiliation:
peter.pham@unsw .edu.au,
Jason Zein
Affiliation:
j.zein@unsw.edu.au, Australian School of Business, University of New South Wales, Sydney, NSW 2052, Australia.
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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
Information
Journal of Financial and Quantitative Analysis , Volume 48 , Issue 6 , December 2013 , pp. 1781 - 1811
Copyright
Copyright © Michael G. Foster School of Business, University of Washington 2013 

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