Ownership Structure, Sharing of Control and Legal Framework: International Evidence

20 Pages Posted: 19 May 2006

See all articles by Félix J. López-Iturriaga

Félix J. López-Iturriaga

University of Valladolid - Department of Financial Economics and Accounting; National Research University Higher School of Economics - International Laboratory of Intangible-driven Economy

Óscar López-de-Foronda

University of Burgos - Department of Economics

Marcos Santamaría

University of Burgos - Department of Economics

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Abstract

We analyze the relation between capital structure, ownership structure, and corporate value for a sample of 1,216 firms from 15 European countries. Our results stress two different conflicts of interest and show the differential role played by the mechanisms of corporate control depending on the legal and institutional environment. In common law countries, as a consequence of the relationships between managers and shareholders, capital structure and managerial ownership are the most effective mechanisms of control. In civil law countries, however, as a consequence of the conflicts between majority and minority shareholders, the ownership concentration becomes crucial and the second reference shareholder plays a critical role in reducing the extraction of private benefits by the dominant largest shareholder.

Keywords: Law and finance approach, capital structure, ownership structure, corporate governance

JEL Classification: G32, G34, G35

Suggested Citation

Lopez-Iturriaga, Felix Javier and Lopez de Foronda, Oscar and Santamaría, Marcos, Ownership Structure, Sharing of Control and Legal Framework: International Evidence. Corporate Governance: An International Review, Forthcoming. Available at SSRN: https://ssrn.com/abstract=902870

Felix Javier Lopez-Iturriaga (Contact Author)

University of Valladolid - Department of Financial Economics and Accounting ( email )

Avda. Valle Esgueva 6
47011 Valladolid
Spain
+34 983 184 395 (Phone)
+34 983 183830 (Fax)

HOME PAGE: http://www2.eco.uva.es/flopez

National Research University Higher School of Economics - International Laboratory of Intangible-driven Economy ( email )

Lebedeva,27
Perm, Perm 614070
Russia

Oscar Lopez de Foronda

University of Burgos - Department of Economics ( email )

Plaza Infanta Elena
E09001 Burgos
Spain

Marcos Santamaría

University of Burgos - Department of Economics ( email )

Plaza Infanta Elena
E09001 Burgos
Spain

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