CH1 :: corporate ownership & governance around world Flashcards
separated ownership/dispersed ownership
- ownership captial/stocks is dispersed among small SH –> no one owns enough stocks to control company
-OWNERSHIP IN HANDS OF SH, CONTROL IN HANDS OF MANAGER
probleem: managers supposed to act in interest of SH, but can do whatever they want
–> AGENGY PROBLEM 1= conflict between interest of management and SH, because separation of OWNERSHIP and CONTROL
Dispersed is goed als managers niet voor eigen gewin gaan want dan kan er ook agency problemen ontstaan
family ownership
= dominant form of ownership
AGENCY PROBLEM 2= conflict between dominant shareholders and minority shareholders
–> agency problem hangt af van difference between VOTING RIGHTS and CASHFLOW RIGHTS
family ownership/agency prob 2 stronger when –> difference between voting and cashflow rights is big
mechanisms to increase family ownership/ agency problem 2
1) multiple voting rights
= certain SH get more than one vote per share in company
2) pyramids
= using intermediate company to make sure that u have more power than cashflow rights
–> high wedge= more agency 2 problems= value destroyed for SH
wedge= difference voting rights and CF rights
wedge= votes owned - shares owned
extra pyramid wedge= votes controlled - votes owned
total wedge= votes controlled - share owned
wedge
wedge= difference voting rights and CF rights
wedge= votes owned - shares owned
extra pyramid wedge= votes controlled - votes owned
total wedge= votes controlled - share owned
La porta, lopez
high antidirector average= high power for SH
low antidirector average= low power SH
–> ownership concentration much higher in countries where SH are weakly protected
explain antidirector rights index (ARI)
= how protected shareholders are against agency problems –> higher score better
high protection –> diverse ownership
low protection –> concentrated ownership
difference English and French legal system
- English
majority in SH rights, minority in creditor rights - French
minority in SH right, majority in creditor rights
creditor rights= right creditors (bondholders and lenders) have in relation to their claims on company assets
alternative models of corporate control:
market model
cap market liquid
equity ownership dispersed
board members independant
ownership and control seperated
alternative models of corporate control:
control model
cap market illiquid
ownership is concentrated
board members are insiders= gekozen door minority stakeholders
ownership and control overlap
explain difference agency problem 1 and 2
1= conflict of interest between managers and shareholders
2= conflict of interest between majority shareholders and minority shareholders
concentrated ownership
capital ownership and control overlap
Concentrated is goed als de wedge niet te groot is als die groot is hebben owners geen slechte gevolgen als cashflow minder is
explain ‘companies under blocking minority contorl’
minorities have 25% of share + one vote –> as soon as u have 25% u can block decision because big firms need 75% to get through with big decision
