The determinants of rent extraction in the parent-subsidiary relation

Klaus Gugler ()

Empirica, 2013, vol. 40, issue 2, 343-362

Abstract: A recurring problem in financial development is to understand which poor quality institutions lead to substantial rent extraction by controllers. When rent extraction is high and its extent difficult to predict, outside investment in firms may decline. Recent work has emphasized the quality of the legal system and the overall quality of political institutions as explaining the degree to which rent extraction can occur. Here we exploit a comprehensive parent-subsidiary data-set to shed light on these questions. Using the relation between parent and subsidiary Tobin’s Q to measure the extent of parent companies’ rent extraction from partially-owned subsidiaries, the results indicate that governmental quality, legal origin, rules on self-dealing and political stability all predict the degree of rent extraction. Copyright Springer Science+Business Media New York 2013

Keywords: Corporate governance; Tunneling; Rent extraction; Political stability; Legal systems; Parent-subsidiary relationships; Cross-border investment; Economic and financial development; Investor protection; D21; G3; G18; G28; G32; G34; G38; K22; O16; P3 (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://hdl.handle.net/10.1007/s10663-012-9189-4 (text/html)
Access to full text is restricted to subscribers.

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:kap:empiri:v:40:y:2013:i:2:p:343-362

Ordering information: This journal article can be ordered from
http://www.springer. ... ration/journal/10663

DOI: 10.1007/s10663-012-9189-4

Access Statistics for this article

Empirica is currently edited by Fritz Breuss and Fritz Breuss

More articles in Empirica from Springer, Austrian Institute for Economic Research, Austrian Economic Association Contact information at EDIRC.
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().