Ownership and Control in Joint Ventures: Theory and Evidence

Ulrich Hege and Robert Hauswald

No 4056, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: Joint ventures, a particularly popular form of corporate cooperation, exhibit ownership patterns that are concentrated at 50-50 or ?50 plus one share? equity allocations for a wide variety of parent firms. In this Paper, we argue that private control benefits create a discontinuity in contribution incentives around equal shareholdings that explains these two cluster points. Using data from US joint ventures, we empirically analyse the determinants of their ownership allocations and find that, consistent with our predictions, parents with similar contribution costs or a high potential for private benefits extraction prefer equal shareholdings and joint control. Similarly, parent-level spillovers make 50-50 ownership more attractive to the detriment of one-sided control while complementarities in parent contributions have the opposite effect. We also find evidence that contingent ownership arrangements such as explicit options and buyout or termination mechanisms serve to mitigate regime-specific contractual inefficiencies.

JEL-codes: D23 G32 L14 (search for similar items in EconPapers)
Date: 2003-09
New Economics Papers: this item is included in nep-cfn and nep-ent
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (29)

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Related works:
Working Paper: Ownership and Control in Joint Ventures: Theory and Evidence (2011)
Working Paper: Ownership and control in joint ventures: theory and evidence (2002)
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