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NBER Working Papers and Publications
|January 2000||Stock Pyramids, Cross-Ownership, and Dual Class Equity: The Mechanisms and Agency Costs of Separating Control from Cash-Flow Rights|
with Lucian A. Bebchuk, Reinier Kraakman
in Concentrated Corporate Ownership, Randall K. Morck, editor
|February 1999||Stock Pyramids, Cross-Ownership, and the Dual Class Equity: The Creation and Agency Costs of Seperating Control from Cash Flow Rights|
with Lucian Bebchuk, Reinier Kraakman: w6951
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 ...
Published: Lucian A. Bebchuk & Reinier Kraakman & George Triantis, 2000. "III. ECONOMIC EFFECTS OF CONCENTRATED CORPORATE OWNERSHIP: 10. Stock Pyramids, Cross-Ownership, and Dual Class Equity: The Mechanisms and Agency Costs of Separating Control from Cash-Flow Rights," NBER Chapters, in: Concentrated Corporate Ownership, pages 295-318 National Bureau of Economic Research, Inc.