Excess Control Rights and Corporate Acquisitions

43 Pages Posted: 15 Mar 2012 Last revised: 2 Oct 2014

See all articles by Francois Belot

Francois Belot

Université de Cergy-Pontoise

Date Written: September 25, 2014


French-listed companies exhibit a concentrated ownership structure, with the largest shareholder holding more voting rights than cash flow rights. This wedge predominantly stems from a typical system of double voting shares. This paper studies the acquisitions made by French-listed firms over the 2000-2009 period and investigates how these ownership characteristics affect acquisition likelihood and acquirer abnormal returns around announcements. Firms whose largest shareholder holds significant excess control rights are less likely to engage in mergers and acquisitions (M&A) activity. The separation of ownership from control is negatively correlated with acquisition quality; this is especially the case for firms that authorize double voting rights. This result suggests that controlling shareholders use corporate acquisitions as a means of extracting private benefits at the expense of minority shareholders. Moreover, it casts doubt on the effectiveness of a new regulation (February 2014) that generalizes double voting rights.

Keywords: Ownership, excess control rights, double voting rights, corporate acquisitions, acquirer return, bidding likelihood.

JEL Classification: G32, G34

Suggested Citation

Belot, Francois, Excess Control Rights and Corporate Acquisitions (September 25, 2014). Available at SSRN: https://ssrn.com/abstract=1695061 or http://dx.doi.org/10.2139/ssrn.1695061

Francois Belot (Contact Author)

Université de Cergy-Pontoise ( email )

33 boulevard du Port
Cergy-Pontoise Cedex, 95011
+33 1 34 25 62 33 (Fax)

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