Voting Power, Control Rents and Corporate Governance: An Integrated Analysis of Owner Control and Corporate Governance

Abstract

This paper integrates existing knowledge in owner control and corporate governance. First it provides different measurements of voting power, and then links the voting power with private benefits of control in an analysis of control rent. The implication of dual classes of shares in a takeover contest is explored. As an application, the power structures of a group of Swedish listed firms are examined using the Shapely-Shubik power indices and the Banzhaf power indices. This paper provides a tool in conducting corporate governance studies, such as degree of control and corporate performance, takeover probability and private benefit of control, etc. Degree of control as an endogenous choice is partly determined by laws and cultural heritage of a country. This needs to be given special care when cross-country comparison is to be conducted. The consistency among corporate governance measures and the harmonization of corporate governance rules in a country setting are most important for the corporate governance system to work efficiently. As a final note, corporate governance rules should be adapted to different types of firms.