Voting Ownership Research Articles

The impact of control structures on firm value

The purpose of this study is to investigate the impact of control structures on the value of family-controlled firms in Turkiye, an emerging market. Turkish firms are usually affiliated with family-controlled business groups. Families control business group firms through pyramid structures and dual-class shares, which results in a control–ownership rights wedge. In this study, I use precise quantitative measures for the control–voting rights wedge (pyramid wedge) and the voting–ownership rights wedge (dual-share wedge) to analyze the impact of control-enhancing mechanisms on firm valuation. The empirical results of the panel data estimation indicate a negative relationship between firm value and the control–voting rights wedge. However, the voting–ownership rights wedge does not affect firm valuation. This study also shows that foreign-family coalition and CEO duality have a positive impact on firm value.

The Effects of Voting Ownership Concentration on Social and Environmental Disclosure: Empirical Evidence from Brazil

Purpose – This study aims to analyze the effects of voting ownership concentration on the social and environmental disclosure of Brazilian companies in their Annual Financial Statements. Design/methodology/approach – Econometric models were estimated considering a sample of 1,252 annual observations of 252 companies in the period 2010-2014, and the social and environmental disclosure was measured through a lexical analysis performed by counting 75 words and key expressions related to social and environmental practices. Findings – Our findings suggest that the social and environmental disclosure of Brazilian companies is positively correlated with their voting ownership concentration. In addition, if the company is listed in the Corporate Sustainability Index or if it is in a potentially aggressive industry with respect to the environment, this also positively contributes to a higher degree of social and environmental disclosure. Originality/value – Our study contributes to the literature on social and environmental disclosure and its association with ownership structure by providing evidence in an emerging market characterized by a high concentration of control.

The Effects of Voting Ownership Concentration on Social and Environmental Disclosure: Empirical Evidence from Brazil

This study aims to analyze the effects of voting ownership concentration on the social and environmental disclosure of Brazilian companies in their Annual Financial Statements. Econometric models are estimated considering a sample of 1,252 annual observations of 252 companies in the period 2010-2014. Social and environmental disclosure is measured through a lexical analysis performed by counting 75 words and key expressions related to social and environmental practices. Our findings suggest that the social and environmental disclosure of Brazilian companies is positively correlated with their voting ownership concentration. In addition, if the company is listed in the Corporate Sustainability Index or if it is in a potentially aggressive industry with respect to the environment, this also positively contributes to a higher degree of social and environmental disclosure. Our study contributes to the literature on social and environmental disclosure and its association with ownership structure by providing evidence in an emerging market characterized by a high concentration of control.

'Empty Voting' and Shareholder Democracy: A Theoretical Perspective of the New Hunting Ground

The shareholder vote is a matter at the core of the governance of the publicly held corporation. Corporate law deals with the agency problem between shareholders and managers by placing the power to monitor in the hands of shareholders. By making voting power proportional to economic ownership shareholders are given an economic incentive to exercise their voting power to maximize firm value. However, the underlying assumption of corporate voting that of a linked set of voting and economical ownership can no longer be relied upon. Innovations in finance, such as derivatives and the growth of share lending have made it easier to decouple voting rights from economic ownership. In this regard, the impact of activist shareholder on corporate governance has recently received considerable attention. In particular, recent scholars have shown that ‘’empty voting’’ - a situation in which an investor accumulates voting power in excess of his economic ownership - is used to influence corporate decision making to generate trading gains. Following the concerns scholars have expressed over empty voting, several regulators in Europe are considering a regulatory response in order to address empty voting. The purpose of this paper is to provide a theoretical framework to assess whether empty voting is harmful for shareholder democracy and to what extent are regulatory measures necessary to adequately respond to it. Chapter 1 will give an overview of the rationale behind corporate laws requiring economic ownership to be tied to voting ownership. It elaborates the ‘one-share one-vote’ principle and vote buying. Chapter 2 explores the variety of mechanisms of decoupling that empty voters can use. Chapter 3 of this paper considers the efficiency implications of empty voting. It discusses what separates efficient empty voting schemes from destructive ones. Chapter 4 describes the ownership disclosure regime of the Transparency Directive that now applies to empty voting. It considers both the disclosure rules that apply to forms of decoupling by outsiders as soft parking. My eventual conclusion will be that regulatory efforts should be undertaken to directly target the existing framework of fiduciary duties in civil law countries to negative empty voters and spare non-negative empty voters as well as other shareholders. However, in common law countries, in which the concept of fiduciary duties for shareholders is relatively limited, corporate law should provide a constrained possibility for corporations to amend their articles of association to limit empty voting. By undertaking these regulatory responses, lawmakers create a legal standing under which shareholders harmed by empty voting of others have a private right to sue the person or entity that cause them harm.

Equity and Debt Decoupling and Empty Voting II: Importance and Extensions

We extend our prior work on how both supply (including the emergence of OTC equity derivatives and growth in share lending) and demand (including the growth of hedge funds) factors now facilitate the large-scale, low-cost decoupling of shareholder voting rights from shareholder economic interests. Both inside and outside shareholders, as well as corporations themselves, can engage in what we termed empty voting - voting while holding greater voting power than economic ownership. Shareholders can also have hidden (morphable) ownership - economic ownership, ostensibly without voting rights, which remains undisclosed under current disclosure rules, but can quickly morph to include voting ownership as well. These forms of decoupling pose important risks to the one-share-one-vote paradigm that underlies conventional models of corporate governance and shareholder voting. We extend our prior work in five primary ways. First, we treat decoupling of voting rights from economic ownership of shares (empty voting and hidden ownership) as special instances of a more general pattern-investors, and corporations themselves, can unbundle the package of rights and obligations which have traditionally been associated with equity (equity decoupling) as well as debt (debt decoupling). Second, we provide evidence that equity decoupling is an important worldwide phenomenon, which adds urgency to the need for disclosure and perhaps other reforms. Third, we go beyond decoupling by shareholders, and examine decoupling strategies that corporations can use to fend off changes in control. Fourth, we expand our integrated equity ownership disclosure proposal to address corporate decoupling, and propose responses to empty voting which go beyond disclosure, including constrained corporate power to limit the voting rights of empty voters, condensing the period from record date to shareholder meeting date, and encouraging institutional investors to recall and vote lent shares. Fifth, we sketch several extensions of our decoupling framework to (a) the full range of shareholder rights and obligations, (b) debt decoupling, and (c) the possible revival of the street sweep takeover strategy.