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Benefits of Control, Capital Structure and Company Growth

[journal article]

Mueller, Elisabeth

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Abstract This paper studies the influence of the benefits of control on the capital structure and the growth of private companies for a sample of 8,964 UK companies with limited liability observed for up to 5 years. It is hypothesised that companies in which existing owners would lose more control if they expanded, have smaller equity increases, are more highly levered and grow more slowly. Potential loss of control is measured as the difference in the probability of winning a vote for the largest owner before and after a hypothetical equity increase. Evidence is found that is consistent with the hypotheses.
Document language English
Publication Year 2008
Page/Pages p. 2721-2734
Journal Applied Economics, 40 (2008) 21
Status Postprint; peer reviewed
Licence PEER Licence Agreement (applicable only to documents from PEER project)