The Principle of Proportionality

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The Principle of Proportionality

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dc.contributor.author Bennedsen, Morten en_US
dc.contributor.author Meisner Nielsen, Kasper en_US
dc.date.accessioned 2009-02-04T10:27:41Z
dc.date.available 2009-02-04T10:27:41Z
dc.date.issued 2005-12-01T00:00:00Z en_US
dc.identifier.uri http://hdl.handle.net/10398/7544
dc.description.abstract Recent policy initiatives within the harmonization of European company laws have promoted a so-called "principle of proportionality" through proposals that regulate mechanisms opposing a proportional distribution of ownership and control. We scrutinize the foundation for these initiatives by analyzing the use of instruments to separate ownership from control across legal regimes in a sample of over 4,000 publicly traded firms from 14 Western European countries. First, we confirm the negative impact on firm value from disproportional ownership structures previously established in a sample of Asian firms by Claessens et al. (2002). Second, we show that dual class shares have a larger and more significant negative effect on firm value than pyramids and cross holdings. Third, we find that the impact of disproportionality and the underlying instruments is inversely related to the level of investor protection. Thus, dual class shares and pyramids substitute legal protection in countries with inadequate investor protection. Fourth, we find no evidence of a significant effect of disproportionality instruments on earnings performance. Finally, we discuss policy implications of these findings in relationship to the process of harmonization of the European capital markets. JEL classifications: G30, G32, G34 and G38 Keywords: Ownership Structure, Dual Class Shares, Pyramids, EU company laws. en_US
dc.format.extent 50 s. en_US
dc.language eng en_US
dc.relation.ispartofseries Working paper;2005-022 en_US
dc.title The Principle of Proportionality en_US
dc.type wp en_US
dc.accessionstatus modt05dec01 miel en_US
dc.contributor.corporation Copenhagen Business School. CBS en_US
dc.contributor.department Øklonomisk Institut en_US
dc.contributor.departmentshort ECON en_US
dc.contributor.departmentuk Department of Economics en_US
dc.contributor.departmentukshort ECON en_US
dc.description.notes Version August 2005 en_US
dc.idnumber x656504098 en_US
dc.publisher.city København en_US
dc.publisher.year 2005 en_US
dc.title.subtitle Separating the Impact of Dual Class Shares, Pyramids and Cross-ownership on Firm Value Across Legal Regimes in Western Europe en_US


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