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Control rights, pyramids, and the measurement of ownership concentration

[journal article]

Edwards, Jeremy S.S.; Weichenrieder, Alfons J.

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Please use the following Persistent Identifier (PID) to cite this document:http://nbn-resolving.de/urn:nbn:de:0168-ssoar-295130

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Abstract The recent corporate governance literature has emphasised the distinction between control and cash-flow rights but has disregarded measurement issues. Control rights may be measured by immediate shareholder votes, the voting rights as traced through ownership chains, or voting power indices that may or may not trace ownership through chains. We compare the ability of various measures to identify the effects of ownership concentration on share valuation using a German panel data set. The widely-used weakest link principle does not perform well in this comparison. Furthermore, measures that trace control through ownership chains do not outperform those that rely on immediate ownership, thus questioning the role of pyramids in the separation of control and cash-flow rights. The paper emphasises that there is a distinction between these two aspects of ownership even without pyramids or preferred stock, identification of which requires measures that, like the Shapley-Shubik index, do not simply equate control rights with voting rights.
Classification Basic Research, General Concepts and History of Economics
Free Keywords Control rights; Cash-flow rights; Pyramids; Ownership structure
Document language English
Publication Year 2009
Page/Pages p. 489-508
Journal Journal of Economic Behavior & Organization, 72 (2009) 1
DOI http://dx.doi.org/10.1016/j.jebo.2009.05.016
Status Postprint; peer reviewed
Licence PEER Licence Agreement (applicable only to documents from PEER project)