تنوع زیادی سهامدار، ریسک پذیری شرکت ها، و منافع حاصل از تغییر برای دیفرانسیل حق رای
|کد مقاله||سال انتشار||مقاله انگلیسی||ترجمه فارسی||تعداد کلمات|
|23243||2012||10 صفحه PDF||سفارش دهید||محاسبه نشده|
Publisher : Elsevier - Science Direct (الزویر - ساینس دایرکت)
Journal : Journal of Banking & Finance, Volume 36, Issue 4, April 2012, Pages 1244–1253
We show how the change to differential voting rights allows dominant shareholders to retain control even after selling substantial economic ownership in the firm and diversifying their wealth. This unbundling of cash flow and control rights leads to more dispersed economic ownership and a closer alignment of dominant and dispersed shareholder interests. When insiders sell sizeable amounts of their economic interests, firms increase capital expenditures, strengthen corporate focus, divest non-core operations, and generate superior industry-adjusted performance. The change to differential voting rights both fosters corporate control activity and creates higher takeover premiums that are paid equally to all shareholders.
Research on the role and effects of concentrated ownership often focuses on how shareholdings of managers and insiders influence firm governance and performance. The work of Jensen and Meckling, 1976 and Leland and Pyle, 1977, and Stulz (1988), among others, finds that greater insider ownership is an effective means of aligning the interests of managers and shareholders. Other work finds that large equity holdings by insiders can lead to risk avoidance with respect to business strategy and investment, given the undiversified financial and human capital of insiders (Amihud and Lev, 1981, Amihud et al., 1990 and Agrawal and Mandelker, 1987). This tradeoff between interest alignment and risk avoidance may explain why prior evidence about the relationship between ownership concentration and firm performance and value is ambiguous (e.g., Demsetz and Lehn, 1985 and McConnell and Servaes, 1990). Moreover, there is little work examining the relationship between dominant shareholder diversification and corporate risk taking, even though many public firms are not widely held. La Porta et al. (1999) show that two-thirds of the largest public firms (and a greater proportion of smaller firms) traded on the world’s major stock markets have dominant shareholders who control corporate actions. We contribute to the literature on concentrated ownership by analyzing how a change from one-share-one-vote to a differential voting structure affects economic ownership, firm performance, business strategy, and corporate risk taking. We find economic ownership becomes less concentrated after public firms adopt differential voting structures. Further, performance improves for the firms where insiders sell a sizeable amount of their economic interests while maintaining voting control. This cashing-out behavior fosters corporate restructuring and greater corporate risk taking that increases economic welfare. This pattern is not observed for firms where insiders retain both their voting rights and cash flow interests, nor for firms where ownership structure becomes more dispersed due to dilutive corporate actions. These results indicate that separating ownership from control can help align the interests of dominant and dispersed shareholders. Our evidence suggests that these improvements in firm strategy are unlikely to occur without a corporate governance change, such as differential voting rights, that allows dominant shareholders to diversify their personal wealth without ceding control. We examine US public firms that change from a single class to a dual class share structure. Before this change, these firms have highly concentrated ownership, with dominant shareholders often holding a majority of the shares. Thus, it is unlikely that concerns about hostile takeovers or the control market are driving the change in voting structure. For the subset of firms whose insiders cash out, the average economic holdings of insiders falls from $173 million to $140 million. These insiders considerably improve the diversification (and liquidity) of their personal wealth while maintaining a substantial economic stake in their firms. Firms with insiders who cash out make business decisions that strengthen corporate focus by divesting non-core assets and expanding investment in core operations. The riskiness of their common stock and the volatility of earnings increase toward industry norms, and these firms demonstrate superior profitability relative to benchmark firms. These findings are consistent with the pursuit of riskier, positive net present value projects that are in the interests of dispersed shareholders, but would probably be rejected under a single class share structure. There is an active takeover market for firms that shift to a dual class structure. We find that the frequency of takeovers among these firms is similar to a set of single class benchmark firms, but with higher takeover premiums. In each of these takeovers, superior and inferior voting class shares receive the same takeover compensation (per share) even though Delaware law does not mandate equal treatment. This evidence suggests implicit tag-along or coattail rights for low vote shareholders, allowing them to share equally in the takeover gains. We also find a positive relationship between insider ownership and the likelihood that sample firms are acquired. This finding suggests that unbundling voting rights from cash flow rights at closely held firms facilitates transfers of corporate control, consistent with the theoretical model of Ferreira et al. (2010). Our work provides evidence of an agency problem created by the risk aversion of dominant shareholders at firms with a single class voting structure. This agency problem has implications for corporation law and regulatory policy. In the US, about 6% of listed firms, including many large and well-known companies, have multiple classes of shares with differential voting rights. In Europe, there is an even broader variation in corporate voting structures (including pyramids, double voting rights, and multiple share classes). In recent years, the EU’s Internal Market and Services Commissioner has sought to narrow the considerable variation in voting rights, arguing that a one-share-one-vote structure should be made mandatory to encourage cross border takeovers and strengthen the single market. Our findings, however, indicate that economic benefits typically arise when closely held firms adopt a differential voting rights structure. This change leads to greater dispersion of economic ownership in the firm, which enhances risk-sharing, fosters restructuring that increases corporate focus, and strengthens profitability. We find no evidence that the shift to a dual class structure acts as an anti-takeover device. It is possible that corporate performance of closely held single class firms could improve to an even greater extent if their ownership structures shifted toward greater dispersion without changing the voting rights structure. This perspective is consistent with evidence that the death of large inside blockholders generates a significant increase in firm value and leads to more dispersed ownership (Slovin and Sushka (1993)). However, insiders at closely held firms who derive private benefits from control might be reluctant to voluntarily cede control to dispersed shareholders by selling their economic interests. We contend that dominant shareholders may benefit from cashing-out some of their economic ownership within the framework of a shift to differential voting rights. This is a feasible alternative that can better align the interests of dominant and dispersed shareholders. Our evidence suggests that, within this context, a one-share-one-vote structure is not likely to be a one-size-fits-all solution for corporation law. Thus, our work provides new perspective about convergence in corporate governance and the merits of contractual freedom about corporate voting rights. Our evidence about the adoption of a differential voting rights structure also has implications about the gains that can be generated by private equity acquisitions of closely held target firms. These gains may not arise in takeovers of such targets by public acquirers with dispersed ownership. Private equity places general (active) partners in direct control of the target firm, replicating the control position of dominant shareholders. However, unlike dominant shareholders at public firms, private equity is a wealth-diversified form of control because the non-voting limited (passive) partners are diversified wealthy investors and institutions. So private equity firms are more likely to eliminate underinvestment problems and change risk-averse investment policies than are firms controlled by poorly diversified dominant shareholders. These risk-increasing decisions can generate gains in target firm performance and value. The remainder of the paper is organized as follows. Section 2 describes methods for adopting differential voting structures and discusses hypotheses about differential voting. Section 3 presents the sample and methodology. Section 4 reports evidence on subsequent ownership changes, the corporate control market, operating performance, and changes in business strategy and risk. Section 5 concludes the paper.
نتیجه گیری انگلیسی
In this paper, we show that when a firm changes its governance structure from a single class of shares to shares with differential voting rights, it enables dominant shareholders to sell substantial economic ownership in the firm and diversify their wealth while retaining control. The unbundling of voting rights and cash flow rights leads to more dispersed economic ownership and a closer alignment of dispersed and dominant shareholder interests. It mitigates a closely-held firm’s reluctance to strengthen corporate focus and undertake risky positive net present value projects. Without the unbundling, dominant shareholders would be unlikely to liquidate substantial ownership. The incentives of their continued, undiversified wealth would encourage decisions that constrain the firm’s business strategy and misdirect investment choices toward corporate-level diversification. After the change to differential voting rights, dominant shareholders at a considerable proportion of firms diversify their personal wealth by selling a substantial amount of economic ownership. These Net-Sell firms increase capital expenditures, strengthen focus, divest non-core operations, and generate superior industry-adjusted profitability. Risk at these firms subsequently rises to industry norms. We find that takeovers are common after the shift to differential voting rights. This active control market is contrary to the anti-takeover hypothesis, but is consistent with theories that argue that differential voting rights foster efficient control changes at closely held firms. Takeovers of these firms generate greater premiums than takeovers of benchmark firms. Moreover, although not mandated by corporation law, low and high vote shares uniformly receive the same compensation per share, indicating that dispersed shareholders benefit as a result of the implicit tag-along or coattail rights intrinsic to this recontracting of voting and cash flow rights.