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Unbundling ownership and control

Ferreira, Daniel, Ornelas, Emanuel ORCID: 0000-0001-8330-8745 and Turner, John L. (2007) Unbundling ownership and control. ECGI Finance Working Paper (172/2007). European Corporate Governance Institute.

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We study optimal corporate control allocations under asymmetric information. We modify the canonical partnership dissolution model to allow for the endogenous determination of ex post ownership and control structures. Using a mechanism design approach, we fully characterize the optimal restructuring mechanism. This mechanism requires increasing the number of shares of the incumbent insider if he remains in control, while giving him a golden parachute that may include both stock and cash if he is deposed. The model exemplifies a novel explanation for the prevalence and persistence of the separation of ownership from control: efficiency in control contests is more easily achieved when ownership of cash flow rights is not concentrated in the hands of insiders. The model generates several novel empirical predictions.

Item Type: Monograph (Working Paper)
Official URL:
Additional Information: © 2007 The Authors
Divisions: Centre for Economic Performance
Subjects: H Social Sciences > HD Industries. Land use. Labor > HD61 Risk Management
H Social Sciences > HG Finance
JEL classification: D - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D82 - Asymmetric and Private Information
G - Financial Economics > G3 - Corporate Finance and Governance > G32 - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure
G - Financial Economics > G3 - Corporate Finance and Governance > G34 - Mergers; Acquisitions; Restructuring; Corporate Governance
Date Deposited: 22 Jul 2011 16:18
Last Modified: 16 May 2024 11:43

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