Do Controlling Shareholders Enhance Corporate Value?
Version of Record online: 11 MAR 2005
Corporate Governance: An International Review
Volume 13, Issue 2, pages 313–325, March 2005
How to Cite
Yeh, Y.-H. (2005), Do Controlling Shareholders Enhance Corporate Value?. Corporate Governance: An International Review, 13: 313–325. doi: 10.1111/j.1467-8683.2005.00425.x
- Issue online: 11 MAR 2005
- Version of Record online: 11 MAR 2005
- corporate governance;
In this study we contribute to the literature by re-examining the effect of control and ownership of controlling shareholder on corporate valuation, and determining which particular mechanism for enhancing voting rights would achieve the negative entrenchment effect. We take Taiwan listed companies, where the ownership concentration structure is similar to that in East Asian countries, as our sample. We find the corporate value is higher when the largest shareholder owns more cash flow rights (ownership), supporting the positive incentive effect. The negative entrenchment effect becomes evident when the largest shareholder's cash flow rights are less than the median. Therefore, if the cash flow rights owned by the largest shareholder are greater than the median, the positive incentive effect will restrain the negative entrenchment effect. In family-controlled companies, the corporate value will conspicuously decrease if the largest shareholder enhances their voting rights through cross-shareholding, deeply participates in management or controls most board of directors.