Ownership-Control Discrepancy and Firm Value: Evidence from France

Posted: 27 Jul 2007 Last revised: 12 Mar 2008

See all articles by Sabri Boubaker

Sabri Boubaker

Ecole de Management de Normandie

Multiple version iconThere are 3 versions of this paper

Abstract

The purpose of this study is to provide an empirical analysis of the relationship between ownership structure of French firms and their value. Using data for 510 French publicly traded firms, the current study provides evidence in support of the entrenchment hypothesis. The results show that large controlling shareholders maintaining grip on control while holding only small fraction of cash flow rights are inclined to expropriate minority shareholders, which in turn detrimentally affects the firm's valuation. The evidence also indicates that pyramiding is the main device set to unduly entrench the large controlling shareholder. Additional analysis reveals that the identity of the second largest controlling shareholder matters. Sharing control with a family constrains the largest controlling shareholder to steer clear of self-serving behavior. However sharing control with a widely held firm or with a financial institution fosters this self-serving behavior.

Keywords: ownership structure, corporate governance, minority expropriation

JEL Classification: G12, G15, G32, G34

Suggested Citation

Boubaker, Sabri, Ownership-Control Discrepancy and Firm Value: Evidence from France. Multinational Finance Journal, Vol. 11, No. 3/4, pp. 211-252, 2007, Available at SSRN: https://ssrn.com/abstract=1003349

Sabri Boubaker (Contact Author)

Ecole de Management de Normandie ( email )

9 rue Claude Bloch
Le Havre Cedex, Cedex 4 14052 Caen
France

HOME PAGE: http://https://www.em-normandie.com/en/sabri-boubaker

Do you have negative results from your research you’d like to share?

Paper statistics

Abstract Views
926
PlumX Metrics