Date of this Version
The Review of Financial Studies
In large U.S. corporations, founding families are the only blockholders whose control rights on average exceed their cash-flow rights. We analyze how they achieve this wedge, and at what cost. Indirect ownership through trusts, foundations, limited partnerships, and other corporations is prevalent but rarely creates a wedge (a pyramid). The primary sources of the wedge are dual-class stock, disproportionate board representation, and voting agreements. Each control-enhancing mechanism has a different impact on value. Our findings suggest that the potential agency conflict between large shareholders and public shareholders in the United States is as relevant as elsewhere in the world.
This is a pre-copyedited, author-produced PDF of an article accepted for publication in The Review of Financial Studies following peer review. The version of record is available online at: http://rfs.oxfordjournals.org/content/22/8/3047.short.
Villalonga, B., & Amit, R. H. (2009). How Are U.S. Family Firms Controlled?. The Review of Financial Studies, 22 (8), 3047-3091. http://dx.doi.org/10.1093/rfs/hhn080
Date Posted: 27 November 2017
This document has been peer reviewed.