Faculty of Economics and Business Administration Publications Database

Ownership Concentration and Share Valuation

Edwards, Jeremy S. S.
Volume: 5
Number: 2
Pages: 143 - 171
Month: 5
ISSN-Print: 1465-6485
Year: 2004
Keywords: G32; Corporate governance; Ownership structure; Private benefits of control; Cash-flow rights; Germany
Abstract: Concentrated ownership of large listed companies is widespread throughout the world, and Germany is typical in this respect. This paper proposes a method of distinguishing empirically between the beneficial and harmful effects of ownership concentration, and applies it to German data. The results show that, for most types of largest shareholder, the beneficial effects on minority shareholders of increased ownership (greater monitoring of management, and reduced incentives to exploit minority shareholders due to greater cash-flow rights) are at least as large as, and sometimes significantly larger than, the harmful effect (greater private benefits of control due to greater control rights).