BibTeX
@MISC{Dyck01and,
author = {Alexander Dyck and Luigi Zingales},
title = {and},
year = {2001}
}
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Abstract
We construct a measure of the private benefits of control in 39 countries based on 393 control transactions between 1990 and 2000. We find that the value of control ranges between –4 % and +65%, with an average of 14 percent. As predicted by theory, in countries where private benefits of control are larger capital markets are less developed, ownership is more concentrated, and privatizations are less likely to take place as public offerings. We also analyze what institutions are most important in curbing these private benefits. A high degree of statutory protection of minority shareholders and a high degree of law enforcement are associated with lower levels of private benefits of control, but so are a high level of diffusion of the press, a high rate of tax compliance, and a high degree of product market competition. A crude R-squared test suggests that the “non traditional ” mechanisms have at least as much explanatory power as the legal ones commonly mentioned in the literature. In fact, in a multivariate analysis newspapers ’ circulation and tax compliance seem to be the dominating factors. We advance an explanation why this might be the case. The benefits of control over corporate resources play a central role in modern thinking about finance and corporate governance. From a modeling device (Grossman and Hart, 1980) the idea of private benefits of control has become a centerpiece of the recent literature in corporate finance, both theoretical and empirical. In fact, the main focus of the literature on investor protection and its role in the development of financial markets
Keyphrases
private benefit high degree tax compliance public offering high rate law enforcement minority shareholder central role financial market recent literature investor protection control transaction multivariate analysis newspaper circulation corporate governance legal one crude r-squared test modeling device product market competition much explanatory power capital market statutory protection high level corporate resource dominating factor non traditional mechanism corporate finance main focus
