Ownership and Control in Joint Ventures: Theory and Evidence

45 Pages Posted: 7 Nov 2003

See all articles by Robert B. H. Hauswald

Robert B. H. Hauswald

American University - Department of Finance and Real Estate

Ulrich Hege

Toulouse School of Economics; European Corporate Governance Institute (ECGI)

Multiple version iconThere are 2 versions of this paper

Date Written: September 2003

Abstract

Joint ventures, a particularly popular form of corporate cooperation, exhibit ownership patterns that are concentrated at 50-50 or '50 plus one share' equity allocations for a wide variety of parent firms. In this Paper, we argue that private control benefits create a discontinuity in contribution incentives around equal shareholdings that explains these two cluster points. Using data from US joint ventures, we empirically analyse the determinants of their ownership allocations and find that, consistent with our predictions, parents with similar contribution costs or a high potential for private benefits extraction prefer equal shareholdings and joint control. Similarly, parent-level spillovers make 50-50 ownership more attractive to the detriment of one-sided control while complementarities in parent contributions have the opposite effect. We also find evidence that contingent ownership arrangements such as explicit options and buyout or termination mechanisms serve to mitigate regime-specific contractual inefficiencies.

JEL Classification: D23, G32, L14

Suggested Citation

Hauswald, Robert B.H. and Hege, Ulrich, Ownership and Control in Joint Ventures: Theory and Evidence (September 2003). Available at SSRN: https://ssrn.com/abstract=466300

Robert B.H. Hauswald (Contact Author)

American University - Department of Finance and Real Estate ( email )

Kogod School of Business
4400 Massachusetts Ave., N.W.
Washington, DC 20016-8044
United States
202-885-1996 (Phone)
202-885-1946 (Fax)

Ulrich Hege

Toulouse School of Economics ( email )

Place Anatole-France
Toulouse Cedex, F-31042
France
+33 5 61 12 86 01 (Phone)

HOME PAGE: http://https://www.tse-fr.eu/people/ulrich-hege

European Corporate Governance Institute (ECGI)

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

HOME PAGE: http:/www.ecgi.org

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