Management Papers

Document Type

Journal Article

Date of this Version

8-2009

Publication Source

The Review of Financial Studies

Volume

22

Issue

8

Start Page

3047

Last Page

3091

DOI

10.1093/rfs/hhn080

Abstract

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.

Copyright/Permission Statement

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.

 

Date Posted: 27 November 2017

This document has been peer reviewed.