Ownership Structure, Sharing of Control and Legal Framework: International Evidence

14 Pages Posted: 13 Dec 2007

See all articles by Óscar López-de-Foronda

Óscar López-de-Foronda

University of Burgos - Department of Economics

Félix J. López-Iturriaga

University of Valladolid - Department of Financial Economics and Accounting; National Research University Higher School of Economics - International Laboratory of Intangible-driven Economy

Marcos Santamaría-Mariscal

affiliation not provided to SSRN

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Abstract

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.

Suggested Citation

Lopez de Foronda, Oscar and Lopez-Iturriaga, Felix Javier and Santamaría-Mariscal, Marcos, Ownership Structure, Sharing of Control and Legal Framework: International Evidence. Corporate Governance: An International Review, Vol. 15, Issue 6, pp. 1130-1143, November 2007. Available at SSRN: https://ssrn.com/abstract=1072204 or http://dx.doi.org/10.1111/j.1467-8683.2007.00636.x

Oscar Lopez de Foronda (Contact Author)

University of Burgos - Department of Economics ( email )

Plaza Infanta Elena
E09001 Burgos
Spain

Felix Javier Lopez-Iturriaga

University of Valladolid - Department of Financial Economics and Accounting ( email )

Avda. Valle Esgueva 6
47011 Valladolid
Spain
+34 983 184 395 (Phone)
+34 983 183830 (Fax)

HOME PAGE: http://www2.eco.uva.es/flopez

National Research University Higher School of Economics - International Laboratory of Intangible-driven Economy ( email )

Lebedeva,27
Perm, Perm 614070
Russia

Marcos Santamaría-Mariscal

affiliation not provided to SSRN

No Address Available

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