TY  - JOUR
AU  - Bebchuk,Lucian
AU  - Kraakman,Reinier
AU  - Triantis,George
TI  - Stock Pyramids, Cross-Ownership, and the Dual Class Equity:  The Creation and Agency Costs of Seperating Control from Cash Flow Rights
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 6951
PY  - 1999
Y2  - February 1999
UR  - http://www.nber.org/papers/w6951
L1  - http://www.nber.org/papers/w6951.pdf
N1  - Author contact info:
Lucian A. Bebchuk
Harvard Law School
1545 Massachusetts Avenue
Cambridge, MA 02138
Tel: 617/495-3138
Fax: 617/812-0554
E-Mail: bebchuk@law.harvard.edu

Reinier Kraakman
Harvard Law School
Hauser Hall, 202
1575 Massachusetts Avenue
Cambridge, MA  02138
Tel: (617) 495-3586
Fax: (617) 496-6118
E-Mail: kraakman@law.harvard.edu

George Triantis
AB  - This paper examines common arrangements for separating control from cash flow rights: stock pyramids, cross-ownership structures, and dual class equity structures.  We describe the ways in which such arrangements enable a controlling shareholder or group to maintain a complete lock on the control of a company while holding less than a majority of the cash flow rights associated with its equity.  Next, we analyze the consequences and agency costs of these arrangements.  In particular, we show that they have the potential to create very large agency costs -- costs that are an order of magnitude larger than those associated with controlling shareholders who hold a majority of the cash flow rights in their companies.  The agency costs of these structures, we suggest, are also likely to exceed the agency costs of attending highly leveraged capital structures.  Finally, we put forward an agenda for research concerning structures separating control from cash flow rights.
ER  -