What Motivates Block Share Ownership?

32 Pages Posted: 4 Sep 2011

See all articles by Asjeet S. Lamba

Asjeet S. Lamba

University of Melbourne; Financial Research Network (FIRN)

Geofrey P. Stapledon

University of Melbourne - Law School

Date Written: October 27, 2010

Abstract

Diffuse share ownership is not as pronounced in the U.S. as many would assume. This has led to a body of research examining large shareholders, or blockholders. Issues addressed include whether firms with a blockholder perform better or worse than widely-held firms; whether firms with a blockholder pay their executives differently to widely-held firms; and whether the presence of a blockholder increases or decreases the incidence takeovers. Another issue, which this paper explores, is what motivates block share ownership. Bebchuk (1999a, 1999b) develops a model which predicts that a firm is more likely to have a controlling blockholder if the anticipated private benefits of control at that firm are comparatively large. This paper examines the factors associated with ownership structure among publicly traded Australian firms. Our results indicate that private benefits of control are a significant factor in explaining the differences in ownership structure among Australian firms. As importantly, we also find that the relationship between the existence of a blockholder and private benefits of control is endogenous. That is, the presence of a controlling blockholder strongly influences the prevalence of these private benefits of control.

Keywords: Corporate Governance, Blockholders, Related party transactions, Australia, Simultaneous equations

JEL Classification: G30, G32, G34

Suggested Citation

Lamba, Asjeet S. and Stapledon, Geofrey P., What Motivates Block Share Ownership? (October 27, 2010). 24th Australasian Finance and Banking Conference 2011 Paper. Available at SSRN: https://ssrn.com/abstract=1917951 or http://dx.doi.org/10.2139/ssrn.1917951

Asjeet S. Lamba (Contact Author)

University of Melbourne ( email )

Department of Finance
Faculty of Business and Economics
Parkville, Victoria 3010
Australia
(61 3) 8344-7011 (Phone)
(61 3) 8344-6914 (Fax)

HOME PAGE: http://www.finance.unimelb.edu.au/who/staffweb.cfm?StaffNo=7

Financial Research Network (FIRN)

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

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

Geofrey P. Stapledon

University of Melbourne - Law School ( email )

Victoria 3010
Australia
+61 3 8344 8916 (Phone)
+61 3 8344 9971 (Fax)

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