Are All Private Benefits of Control Ineffective? Principal–Principal Benefits, External Governance Quality, and Firm Performance

Steve Sauerwald, Pursey P. M. A. R. Heugens, Roxana Turturea and Marc van Essen

Journal of Management Studies, 2019, vol. 56, issue 4, 725-757

Abstract: Private benefits of control (PBC) are benefits that controlling shareholders consume, but that are not shared with minority shareholders. Research focusing on the value protection role of corporate governance typically frames PBC as principal–principal (PP) agency costs, and interprets them as a form of minority shareholder expropriation that decreases firm performance. Taking a value creation perspective of corporate governance, however, we propose a more nuanced role for PBC. Specifically, we see them also as PP agency benefits that compensate controlling shareholders for their monitoring and advisory services, which can increase firm performance. Since both PP costs and benefits affect firm performance, we theorize that PBC enhance firm performance at a diminishing rate. Furthermore, we show that the effect of PBC on firm performance is more positive when country‐level external governance mechanisms are strong.

Date: 2019
References: Add references at CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
https://doi.org/10.1111/joms.12420

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bla:jomstd:v:56:y:2019:i:4:p:725-757

Ordering information: This journal article can be ordered from
http://www.blackwell ... s.asp?ref=00022-2380

Access Statistics for this article

Journal of Management Studies is currently edited by Timothy Clark, Steven W. Floyd and Mike Wright

More articles in Journal of Management Studies from Wiley Blackwell
Bibliographic data for series maintained by Wiley Content Delivery ().