Does state ownership hurt or help minority shareholders? International evidence from control block acquisitions

Pursey P. M. A. R. Heugens, Steve Sauerwald, Roxana Turturea and Marc van Essen ()
Additional contact information
Pursey P. M. A. R. Heugens: Erasmus University Rotterdam (The Netherlands, Rotterdam) - EUR
Steve Sauerwald: UIC - University of Illinois [Chicago] - University of Illinois System
Roxana Turturea: Aalto University (Finland, Espoo)
Marc van Essen: University of South Carolina [Columbia]

Post-Print from HAL

Abstract: Research Summary: We argue that state ownership is a crucial policy instrument for alleviating what is perhaps the most important principal-principal (PP) agency problem around the globe: private benefits of control (PBC). Our results illustrate that states reduce PBC in the companies in which they acquire controlling ownership positions. We also examine how legal and political institutions influence the extent to which states accomplish this goal. Antiself-dealing legal regulations make states more effective in their efforts to constrain PBC, while political constraints make them less effective. Regimes with high state capacity appear not to prioritize PBC reduction. We test and corroborate these ideas in a sample of 1,354 control transactions across 54 countries. Managerial Summary: The one-sided appropriation of wealth by dominant owners is arguably the biggest threat to minority shareholders around the globe. An important question that has thus far remained unaddressed is whether state ownership of firms increases or decreases the extraction of these so-called PBC. By investigating a large number of transactions involving the transfer of corporate control in 54 countries, we find that state acquirers of controlling ownership positions generally respect minority shareholder rights more than other types of new controlling shareholders. This effect is stronger in countries with strong legal protection of minority shareholders. However, political constraints make it more challenging for state acquirers to keep PBC in check while "strong" states may (mis)use the firms they invest in as policy vehicles.

Keywords: control transactions; legal institutions; political institutions; private benefits of control; state ownership (search for similar items in EconPapers)
Date: 2020-11-01
References: Add references at CitEc
Citations:

Published in Global Strategy Journal, 2020, 10 (4), pp.750 - 778. ⟨10.1002/gsj.1337⟩

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

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:hal:journl:hal-05656778

DOI: 10.1002/gsj.1337

Access Statistics for this paper

More papers in Post-Print from HAL
Bibliographic data for series maintained by CCSD ().