Cross-Ownership: A Device for Management Entrenchment?

Marc Levy () and Ariane Szafarz

No 16-009, Working Papers CEB from ULB -- Universite Libre de Bruxelles

Abstract: By artificially inflating capital and creating own shares, cross-ownership can be a key device for managerial entrenchment. This paper proposes a game-theoretical method to measure the extent of shareholder expropriation through cross-ownership. By properly accounting for cross-ownership linkages, we show how managers can seize indirect voting rights, and so insulate their firms from outside control. Significant examples of cross-ownership are found not only in civil law countries, but also in the U.S. mutual fund industry. We apply our method to Germany’s Allianz Group. This paper paves the way to better regulatory appraisal of management entrenchment through cross-ownership.

Keywords: Corporate governance; corporate control; cross-ownership; shareholder expropriation; Allianz Group (search for similar items in EconPapers)
JEL-codes: C44 C71 D72 D74 G32 G34 (search for similar items in EconPapers)
Pages: 51 p.
Date: 2016-01-21
New Economics Papers: this item is included in nep-bec
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Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Cross-Ownership: A Device for Management Entrenchment? (2017)
Working Paper: Cross-Ownership: A Device for Management Entrenchment? (2017)
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