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Control Rights (control + right)

Distribution by Scientific Domains
Business, Economics, Finance and Accounting87%

Selected Abstracts

Information and Control in Ventures and Alliances

THE JOURNAL OF FINANCE, Issue 5 2005
WOUTER DESSEIN
ABSTRACT This paper develops a theory of control as a signal of congruence of objectives, and applies it to financial contracting between an investor and a privately informed entrepreneur. We show that formal investor control is (i) increasing in the information asymmetries ex ante, (ii) increasing in the uncertainty surrounding the venture ex post, (iii) decreasing in the entrepreneur's resources, and (iv) increasing in the entrepreneur's incentive conflict. In contrast, real investor control,that is, actual investor interference,is decreasing in information asymmetries. Control rights are further such that control shifts to the investor in bad states of nature. [source]

Corporate Governance and Competitive Advantage in Family-Controlled Firms

ENTREPRENEURSHIP THEORY AND PRACTICE, Issue 3 2005
Michael Carney
Recent attempts to identify the basis of family-controlled firms' competitive advantage have drawn upon the resource-based view of the firm. This article supplements these efforts and advances the argument that family-controlled firms' competitive advantage arises from their system of corporate governance. Systems of corporate governance embody incentives, authority patterns, and norms of legitimation that generate particular organizational propensities to create competitive advantages and disadvantages. For comparative purposes, the characteristics of managerial, alliance, and family governance are reviewed. The impact of a family's control rights over a firm's assets generates three dominant propensities (parsimony, personalism, and particularism). These propensities give advantages in scarce environments, facilitate the creation and utilization of social capital, and engender opportunistic investment processes. The experience of family-controlled firms in emerging markets is drawn upon to illustrate the argument. [source]

Diversification, Ownership and Control of Swedish Corporations

EUROPEAN FINANCIAL MANAGEMENT, Issue 3 2002
John A. Doukas
We study the short- and long-term valuation effects of Swedish takeovers. Using a sample of 93 bidding firms that acquired 101 targets between 1980 and 1995, we find that diversifying acquisitions lead to a negative market reaction and deterioration of the operating performance of the bidder. Announcement and performance gains in each of the three years following the acquisition occur only when bidders expand their core rather than their peripheral lines of business. Our findings suggest that focused acquisitions lead to greater synergies and operating efficiencies than diversifying acquisitions. Intra-group acquisitions, however, show that bidders do not realise significant gains whether they adopt diversifying or focusing investment strategies by purchasing firms controlled by the Wallenberg and SHB conglomerate groups. Intra-group targets realize significant gains regardless bidder's investment strategy. Finally, the evidence does not support the view that intra-conglomerate acquisitions are associated with expropriation of minority shareholders. However, they appear to enhance the control rights of large shareholders of the bidding firm. [source]

Debt Covenants and Accounting Conservatism

JOURNAL OF ACCOUNTING RESEARCH, Issue 1 2010
VALERI V. NIKOLAEV
ABSTRACT Using a sample of over 5,000 debt issues, I test whether firms with more extensive use of covenants in their public debt contracts exhibit timelier recognition of economic losses in accounting earnings. Covenants govern the transfer of decision-making and control rights from shareholders to bondholders when a company approaches financial distress and thereby limit managers' abilities to expropriate bondholder wealth. Covenants are expected to constrain managerial opportunism, however, only if the accounting system recognizes economic losses in earnings in a timely fashion. Thus, the demand for timely loss recognition should increase with a contract's reliance on covenants. Consistent with this conjecture, I find evidence that reliance on covenants in public debt contracts is positively associated with the degree of timely loss recognition. I also find evidence that the presence of prior private debt mitigates this relationship. [source]

Top executive turnovers: Separating decision and control rights

MANAGERIAL AND DECISION ECONOMICS, Issue 1 2005
Robert Neumann
This paper examines the relationship between performance and top executive turnovers using a sample of 81 turnovers and matching companies listed on the Copenhagen Stock Exchange. We find that poor market performance increases the probability of management replacements and that forced layoffs are value-increasing events while voluntary resignations are value-decreasing events. Large shareholders as active monitors, or part of corporate control, are not exhibited in the results. If large shareholders have any influence on CEO turnovers it is not revealed in our data. Indeed, separating control rights from decision rights does not appear to affect managerial turnovers. Copyright © 2004 John Wiley & Sons, Ltd. [source]

Nonprofit versus corporate governance: An economic approach

NONPROFIT MANAGEMENT & LEADERSHIP, Issue 3 2008
Gerhard Speckbacher
This article proposes a new theoretical concept of nonprofit governance using transaction cost economics and the economic theory of contracts. After a short review of economic approaches to corporate governance, I clarify the specific nature of the governance problem in nonprofit organizations. Based on this analysis, I derive criteria for selecting an organization's relevant stakeholders. If stakeholders provide valuable specific resources without the protection of a comprehensive contract that details exactly how the organization is to use these resources, then such stakeholders seek decision and control rights in order to direct the use of the resources they have provided. I argue that the core problem of governance is how to enhance valuable specific contributions of the relevant stakeholders while keeping the costs of bargaining between stakeholders and the costs of collective decision making low. The theory developed is then applied in a discussion of practically relevant governance mechanisms, and the concept of governance is used to contribute to the discussion on the strengths and weaknesses of the nonprofit character of organizations from a governance perspective. [source]

DO MARKETS PENALIZE AGENCY CONFLICTS BETWEEN CONTROLLING AND MINORITY SHAREHOLDERS?

THE DEVELOPING ECONOMIES, Issue 3 2007
EVIDENCE FROM CHILE
G32; G34; O16 Using a sample of Chilean listed firms with widespread presence of economic conglomerates that use pyramid structures to control affiliated companies, we find that firms where controlling shareholders have higher coincidence between cash and control rights are persistently more valued by the market. We carefully check that our results are not driven by omitted variable biases and control for reverse causation using a feature of Chilean Corporations Law that provides an exogenous instrument for ownership concentration. [source]