Why Do Controlling Families of Public Firms Sell Their Remaining Ownership Stake?

Abstract:     
I investigate what leads controlling families of publicly traded firms to sell their remaining ownership stake. The sale of a controlling stake is best explained in the context of theories of the firm related to optimal risk-bearing, the separation of ownership and management expertise, the CEO succession process, and the monitoring provided by outside blockholders. A timing explanation is only marginally supported. The sale of a controlling stake is not explained by insufficient financial resources to fully invest in growth opportunities. My study offers insights into the final stage of the process in which entrepreneurs sequentially sell their firm to outside parties and also identifies the nature of costs of concentrated ownership.

Keywords: Ownership structure, capital structure, corporate governance, mergers and acquisitions

JEL Classifications: G31, G32, G34

Accepted Paper Series