Ownership structure, sharing of control and legal framework. International evidence

Abstract

Analizamos la relación entre estructura del capital, estructura de la propiedad, y gobierno corporativo para una muestra de 1.216 empresas de 15 países europeos. Nuestros resultados recojen dos conflictos de intereses diferentes y muestran el papel diferencial jugado por los mecanismos de control corporativo dependiendo del ambiente legal e institucional.

We analyze the relation between capital structure, ownership structure, and corporate value for a sample of 1,216 firms from 15 European countries. Our results stress two different conflicts of interest and show the differential role played by the mechanisms of corporate control depending on the legal and institutional environment. In common law countries, as a consequence of the relationships between managers and shareholders, capital structure and managerial ownership are the most effective mechanisms of control. In civil law countries, however, as a consequence of the conflicts between majority and minority shareholders, the ownership concentration and the sharing of control within the firm become crucial. In this scenario, the second reference shareholder plays a critical role in contesting the control of the dominant largest shareholder in order to reduce the extraction of private benefits and improve the firm s performance.