The Trade-Off Between Risk and Control in Corporate Ownership

M.C. Manjon

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    Abstract

    This paper analyses the risk control trade o$ in corporate ownership. It presents a simple model in which large shareholders decide their share depending on their risk aversion, risk-neutral effects attached to rm size and the e$ectiveness of di$erent (external and internal) mechanisms for controlling managers behaviour. Two institutional settings in which the expected benefits from control appear to overcome risk aspects are explored: the USA at the turn of the 20th century and Spain in the 1990's. The empirical evidence seems to support the predictions of the model regarding the relationship between ownership concentration, the characteristics of governance and the size of the firm.
    Original languageEnglish
    Place of PublicationTilburg
    PublisherVakgroep CentER
    Number of pages31
    Volume2003-81
    Publication statusPublished - 2003

    Publication series

    NameCentER Discussion Paper
    Volume2003-81

    Keywords

    • Corporate Governance
    • Disciplinary Mechanisms
    • Large Shareholders

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