Do controlling shareholders enhance corporate value?

Yin-Hua Yeh*

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

77 Scopus citations

Abstract

In this study we contribute to the literature by re-examining the effect of control and ownership of controlling shareholder on corporate valuation, and determining which particular mechanism for enhancing voting rights would achieve the negative entrenchment effect. We take Taiwan listed companies, where the ownership concentration structure is similar to that in East Asian countries, as our sample. We find the corporate value is higher when the largest shareholder owns more cash flow rights (ownership), supporting the positive incentive effect. The negative entrenchment effect becomes evident when the largest shareholder's cash flow rights are less than the median. Therefore, if the cash flow rights owned by the largest shareholder are greater than the median, the positive incentive effect will restrain the negative entrenchment effect. In family-controlled companies, the corporate value will conspicuously decrease if the largest shareholder enhances their voting rights through cross-shareholding, deeply participates in management or controls most board of directors.

Original languageEnglish
Pages (from-to)313-325
Number of pages13
JournalCorporate Governance: An International Review
Volume13
Issue number2
DOIs
StatePublished - 1 Jan 2005

Keywords

  • Control
  • Corporate governance
  • Ownership
  • Taiwan

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