Managing Ownership by Management

52 Pages Posted: 29 Apr 2024

See all articles by Julian R. Franks

Julian R. Franks

London Business School - Institute of Finance and Accounting; Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI)

Colin Mayer

University of Oxford - Said Business School; Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI)

Hideaki Miyajima

Waseda University - Graduate School of Commerce; Research Institute of Economy, Trade and Industry (RIETI)

Ryo Ogawa

Waseda University - Graduate School of Commerce

Date Written: April 14, 2024

Abstract

This paper provides a first analysis of a largely undocumented phenomenon of management creating firm value by managing the ownership of their own firms. It describes how firms in Japan purchase blocks of shares from insiders, hold them in treasury stock and sell them to strategic corporate investors. In the process, they address the Grossman Hart free-riding problem and its associated market failures by selling the shares at a discount, thereby allowing strategic buyers to capture some of the value they create. The paper shows that these management organized ownership transactions are on average value enhancing.

Keywords: Corporate ownership, managerial discretion, stock repurchases, treasury stock, private placements

JEL Classification: G32, G35, K22

Suggested Citation

Franks, Julian R. and Mayer, Colin and Miyajima, Hideaki and Ogawa, Ryo, Managing Ownership by Management (April 14, 2024). European Corporate Governance Institute – Finance Working Paper No. 977/2024, Available at SSRN: https://ssrn.com/abstract=4809243 or http://dx.doi.org/10.2139/ssrn.4809243

Julian R. Franks

London Business School - Institute of Finance and Accounting ( email )

Institute of Finance and Accounting
Sussex Place - Regent's Park
London NW1 4SA
United Kingdom
+44 20 7262 5050 x3449 (Phone)
+44 20 7724 3317 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

European Corporate Governance Institute (ECGI)

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

HOME PAGE: https://ecgi.global/

Colin Mayer (Contact Author)

University of Oxford - Said Business School ( email )

Park End Street
Oxford, OX1 1HP
Great Britain
+44 1865 288112 (Phone)
+44 1865 288805 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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

Hideaki Miyajima

Waseda University - Graduate School of Commerce ( email )

1-6-1, Nishi-Waseda
Shinjuku-ku, Tokyo 169-8050
Japan
(81 3) 5286 2019 (Phone)
(81 3) 3203 7067 (Fax)

Research Institute of Economy, Trade and Industry (RIETI) ( email )

1-3-1 Kasumigaseki
Chiyoda-ku
Tokyo 100-8901
Japan

Ryo Ogawa

Waseda University - Graduate School of Commerce ( email )

1-6-1, Nishi-Waseda
Shinjuku-ku, Tokyo 169-8050
Japan

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