Abstract
We investigate the ultimate distribution of ownership and the implied allocation of control in a sample of 17.000+ closely held corporations. Motivated by recent corporate governance theories we define control dilution as the absence of a single dominating shareholder. Most firms have one or two ultimate owners implying that control is in general very concentrated, however, we show that among firms with multiple owners there is a significant tendency of diluting control. Control dilution is positively affected by the presence of a strong owner-manager and it has a significant positive effect on performance. Hence, we conclude that control dilution is a strategic choice in closely held corporations.
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