Creating Value by Changing the Old Guard: The Impact of Controlling Shareholder Heterogeneity on Firm Performance and Corporate Policies

51 Pages Posted: 13 Jan 2010 Last revised: 8 Jul 2018

See all articles by Hua Deng

Hua Deng

The Australian National University; Financial Research Network (FIRN)

Fariborz Moshirian

Institute of Global Finance, UNSW Business School

Peter K. Pham

Australian School of Business - University of New South Wales; Financial Research Network (FIRN)

Jason Zein

UNSW Business School; Financial Research Network (FIRN)

Date Written: April 28, 2012

Abstract

Theory suggests that controlling shareholders can influence firm value through both shared benefits creation and private benefits consumption. Using negotiated control-block transfers from 31 countries, we look beyond ownership concentration and investigate how controlling shareholder heterogeneity influences the relative importance of these two effects. We document that a control transfer precipitates positive firm outcomes particularly when the vendor has maintained control over an extended period and the acquirer displays a strong incentive to engage in restructuring. In such cases, we observe a sustained positive price reaction, more focused corporate investments, lower leverage, higher operating efficiency, and superior long-term performance.

Keywords: shareholder identity, corporate control, firm performance, corporate policies

JEL Classification: G32, G34

Suggested Citation

Deng, Hua and Moshirian, Fariborz and Pham, Peter Kien and Zein, Jason, Creating Value by Changing the Old Guard: The Impact of Controlling Shareholder Heterogeneity on Firm Performance and Corporate Policies (April 28, 2012). Journal of Financial and Quantitative Analysis (JFQA), Vol. 48, No. 6, 2013, Available at SSRN: https://ssrn.com/abstract=1535705 or http://dx.doi.org/10.2139/ssrn.1535705

Hua Deng (Contact Author)

The Australian National University ( email )

Canberra
Australia
61-2-6125 6700 (Phone)
61-2-6125 0087 (Fax)

Financial Research Network (FIRN) ( email )

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

Fariborz Moshirian

Institute of Global Finance, UNSW Business School ( email )

Sydney, NSW 2052
Australia
+61 2 93855859 (Phone)
+61 2 94877519 (Fax)

Peter Kien Pham

Australian School of Business - University of New South Wales ( email )

UNSW Business School
High St
Sydney, NSW 2052
Australia

Financial Research Network (FIRN) ( email )

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

Jason Zein

UNSW Business School ( email )

Sydney, NSW 2052
Australia
+61 2 93855858 (Phone)
+61 2 93855858 (Fax)

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

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