We present data on ownership structures of large corporations in 27 wealthy economies, making an effort to identify the ultimate controlling shareholders of these firms. We find that, except in economies with very good shareholder protection, relatively few of these firms are widely held, in contrast to the Berle and Means image of ownership of the modern corporation. Rather, these firms are typically controlled by families or the State. Equity control by financial institutions or other widely held corporations is far less common. The controlling shareholders typically have power over firms significantly in excess of their cash flow rights, primarily through the use of pyramids and participation in management. * Harvard University. We are grateful to Alexander Aganin, Carlos Berdejo-Izquierdo, David Grossman, Bernardo Lopez-Morton, Tatiana Nenova, Ekaterina Trizlova and David Witkin for help with assembling the data, to Lucian Bebchuk, Marco Becht, Mihir Desai, Oliver Hart, Louis Kaplow, Ren Stulz, Robert Vishny, Luigi Zingales, and two anonymous referees for advice, and to the NSF for financial support. In their 1932 classic, "The Modern Corporation and Private Property," Adolph Berle and Gardiner Means called attention to the prevalence of widely held corporations in the United States, in which ownership of capital was dispersed between small shareholders, yet control was concentrated in the hands of managers. For at least two generations, their book fixed the image of the modern corporation as one run by professional managers unaccountable to shareholders. The book stimulated an enormous "managerialist" literature on the objectives of such managers, including the important work of Baumol (1959), Marris (1964), Penrose (1959), and Williamson (1964), as well as Galbr...

I examine whether the discount of diversified firms can actually be attributed to diversification itself, using recent econometric developments about causal inference. The value effect of diversification is unbiasedly estimated by matching diversified and specialized firms on the propensity score----the predicted values from a probit model of the propensity to diversify. I apply this method on a sample of diversified firms that trade at a significant mean and median discount relative to specialized firms of similar size and industry. I find that, when a more comparable benchmark based on propensity scores is used, the diversification discount as such disappears or even turns into a premium. 1 In a seminal paper, Wernerfelt and Montgomery (1988) find that diversification has a negative effect on firm value, as measured by Tobin's q. Their result has been confirmed by the later studies of Lang and Stulz (1994), Berger and Ofek (1995), and others who, using an industry-adjusted Tobin's ...

We document that ownership by officers and directors of publicly-traded firms is on average higher today than earlier in the century. Managerial ownership rises from 13 percent for the universe of exchange-listed corporations in 1935, the earliest year for which such data exist, to 21 percent in 1995. We examine in detail the robustness of the increase and explore hypotheses to explain it. Higher managerial ownership has not substituted for alternative corporate governance mechanisms. Lower volatility and greater hedging opportunities associated with the development of financial markets appear to be important factors explaining the

We provide measures of absolute and relative equity agency costs for corporations under different ownership and management structures. Our base case is Jensen and Meckling's (1976) zero agency-cost firm, where the manager is the firm's sole shareholder. Utilizing a sample of 1,708 small corporations from the FRB/NSSBF database, we find evidence supporting several predictions of agency cost theory. Agency costs are found to be: i) significantly higher when an outsider rather than an insider manages the firm; ii ) inversely related to the manager's ownership share; iii) increasing with the number of non-manager shareholders, and iv) to a lesser extent, lower with greater monitoring by banks.

Many firms deploy takeover defenses at the time of their IPOs, although at significantly lower rates than for seasoned corporations. We find that IPO managers deploy takeover defenses particularly when their compensation is high, shareholdings are small, and the oversight from non-managerial shareholders is weak. We also find that the presence of a takeover defense in IPO firms is negatively related to acquisition likelihood, yet has no impact on takeover premiums for those firms that are acquired. Together, these results suggest that shareholders ’ marginal costs of takeover defenses exceed the benefits. Takeover Defenses at IPO Firms 1.

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This paper uses a new dataset to examine the issue of how the design of privatization affects outcomes. Prior studies of Czech privatization have focused largely on how the widespread distribution of shares through vouchers may have motivated the new owners to strip assets from privatized firms. We find evidence for static asset stripping, but also for what Akerlof and Romer (1993) call looting borrowing heavily with no intent to repay in order to use the loans for private purposes. This occurred because the larger privatized companies had privileged access to credit from state controlled banks that had little incentive to enforce debt contracts. This finding has significant policy implications, namely that financial incentives and regulation are as important as ownership structure in privatization design. 1.

There is a major debate regarding the role of concentrated family ownership and control in large firms, with three positions suggesting that such concentration is (1) good, (2) bad, or (3) irrelevant for firm value. Why are there such differences? We theorize that the impact of family ownership and control on firm value is associated with the level of shareholder protection embodied in legal and regulatory institutions of a country. Data from 634 publicly listed large family firms in seven Asian countries (Hong Kong, Indonesia,

This paper investigates whether investment spending of firms is sensitive to the availability of internal funds. Imperfect capital markets create a hierarchy for the different sources of funds such that investment and financial decisions are not independent. The relation between corporate investment and free cash flow is investigated using the Bond and Meghir (1994a) Eulerequation model for a panel of 240 companies listed on the London Stock Exchange over a 6 year period. This method allows for a direct test of the first-order condition of an intertemporal maximisation problem. It does not require the use of Tobin's q, which is subject to mis-measurement problems. Apart from past investment levels and generated cash flow, the model also includes a leverage factor which captures potential bankruptcy costs and the tax advantages of debt. More importantly, we investigate whether ownership concentration by class of shareholder creates or mitigates liquidity constraints. Control is expecte...