Filatotchev, I;
Mickiewicz, T;
(2001)
Ownership Concentration, 'Private Benefits of Control' and Debt Financing.
(Economics Working Papers
4).
Centre for the Study of Economic and Social Change in Europe, UCL: London, UK.
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Abstract
Building on the ‘law and economics’ literature, this paper analyses corporate governance implications of debt financing in an environment where a dominant owner is able to extract ex ante ‘private benefits of control’. Ownership concentration may result in lower efficiency, measured as a ratio of a firm’s debt to investment, and this effect depends on the identity of the largest shareholder. Moreover, entrenched dominant shareholder(s) may be colluding with fixed-claim holders in extracting ‘control premium’. One of possible outcomes is a ‘crowding out’ of entrepreneurial firms from the debt market, and this is supported by evidence from the transition economies.
| Type: | Working / discussion paper |
|---|---|
| Title: | Ownership Concentration, 'Private Benefits of Control' and Debt Financing |
| Open access status: | An open access version is available from UCL Discovery |
| DOI: | 10.2139/ssrn.286372 |
| Language: | English |
| Additional information: | This research forms part of the ACE-Phare project P98-1048-R “Corporate governance, relational investors, strategic restructuring and performance in Hungary and Poland”. Corresponding author: Tomasz Mickiewicz, SSEES, UCL, Senate House, Malet St., London WC1E 7HU, UK |
| Keywords: | Ownership, benefits of control, debt |
| UCL classification: | UCL UCL > Provost and Vice Provost Offices UCL > Provost and Vice Provost Offices > UCL SLASH UCL > Provost and Vice Provost Offices > UCL SLASH > SSEES |
| URI: | https://discovery.ucl.ac.uk/id/eprint/17577 |
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