- Email: [email protected]
Disentangling disproportionality
Economics Letters 117 (2012) 743–745
Contents lists available at SciVerse ScienceDirect
Economics Letters journal homepage: www.elsevier.com/locate/ecolet
Disentangling disproportionality Thomas Poulsen ∗ Copenhagen Business School, Department of International Economics and Management, Porcelaenshaven 24 A, 2000 Frederiksberg, Denmark
article
info
Article history: Received 21 March 2011 Received in revised form 22 August 2012 Accepted 23 August 2012 Available online 27 August 2012
abstract The literature on deviations from one share-one vote seems to ignore that a difference between influence and investment, i.e., disproportionality, may exist without control enhancing mechanisms such as dual class shares. I propose a method to disentangle disproportionality and argue for its relevance. The consequences are documented on a testing data set. © 2012 Elsevier B.V. All rights reserved.
JEL classification: G32 G34 Keywords: Ownership structure Disproportionality Voting power Firm value
1. Introduction A certain type of agency problem follows from ownership structures with both large and small shareholders. When a large shareholder controls a firm, the standard assumption that the firm should be run so as to maximize its value may conflict with the large shareholder’s utility maximization.1 A series of papers find a negative relationship between the size of the largest shareholder and the value of outside equity, indicating that such a conflict of interest indeed exists.2 , 3 This conflict is easily aggravated by control enhancing mechanisms such as dual-class shares since they provide the owner of the superior voting shares with more influence (voting rights) than what is warranted by her investment (cash flow rights). When economic rents are distributed according to influence (voting rights) but paid according to investment (cash flow rights), a difference between voting rights and cash flow rights clearly creates obscure incentives. The effect has been studied by
∗
Tel.: +45 38152372. E-mail address: [email protected].
1 Note that this is not a formal agency problem in the sense that no explicit contracts exist. Rather, it is a conflict of interest. 2 This strand of literature dates back to Stulz (1988), Morck et al. (1988), and McConnell and Servaes (1990). Recent reviews can be found in Burkart and Lee (2008) and Adams and Ferreira (2008). 3 Trying to account for the endogeneity of ownership structures, this relationship has been questioned by e.g. Demsetz and Lehn (1985) and Himmelberg et al. (1999). 0165-1765/$ – see front matter © 2012 Elsevier B.V. All rights reserved. doi:10.1016/j.econlet.2012.08.036
e.g. Claessens et al. (2002) who find that an approximation of Tobin’s Q increases with the largest shareholder’s cash flow rights but decreases with the wedge between voting rights and cash flow rights. What this paper and other papers on deviations from one share-one vote seem to ignore is that a difference between influence and investment may exist without control enhancing mechanisms. The ownership structure in itself may provide the largest shareholder with more influence than what is warranted by her investment. This can be realized if one thinks of influence in terms of voting power rather than voting rights. Papers on disproportionality ought to notice the difference between these two types. In the next section, I will propose a method to disentangle them. Then, I will present a testing data set and illustrate the importance of noticing the difference. Section 4 concludes. 2. Methodology Power always manifests itself in a relational manner.4 One cannot meaningfully say that a particular shareholder has power without specifying the role of the remaining shareholders in the relationship as well. For this reason, the method is grounded in the game theoretic idea of voting power instead of the
4 The terms ‘‘influence’’ and ‘‘power’’ are used as synonyms. However, one can make a distinction between influence as a more general concept and power as intended influence.
744
T. Poulsen / Economics Letters 117 (2012) 743–745
simple dichotomy between control and no control based on some arbitrary criterion in terms of the voting rights of the largest shareholder. Before presenting the voting power index, it is important to mention that power indices measure a priori voting power. In general, game theory represents an abstract model of decision making, not the social reality of decision making itself. A priori voting power is the component of a posteriori voting power that shareholders derive solely from the decision rule, computed without regard to specific interests and preferences and the nature of the proposal to be voted upon. One can think of it as formal power as given by the constitutional rules of a collectivity. 2.1. Choosing the right index A simple voting game is a pair (N , v), where N = {1, . . . , n} is a set of shareholders and v is a characteristic function mapping each non-empty subset S ⊆ N (a coalition where s represents the number of shareholders in the coalition) to 0 (non-winning) or 1 (winning), such that: 1. v (∅) = 0 (the empty coalition is non-winning) and v (N ) = 1 (the coalition of all shareholders is winning), 2. there exists at least one subset S ⊆ N such that v (S ) = 1 (there is at least one winning coalition), 3. for all subsets S , T ⊆ N , S ⊆ T implies v(S ) ≤ v(T ) (a superset of a winning coalition is also winning), 4. for all subsets S ⊆ N , v (S ) + v(N \ S ) ≤ 1 (for any partition of the set of shareholders into two disjoint coalitions, at most one is winning). Such a game is fully specified once the distribution of voting weights and the decision-making rule are given. A power index is a function Φ that maps a voting game to a vector of real numbers, {φ1 , . . . , φn }, and φi is the voting power of shareholder i. The Banzhaf (1965) index (Bz) and the Shapley and Shubik (1954) index (SS) are instances of such functions:
• ΦBz ({N , v}) := φ {φ1 , . . . , φn }, where 1 [v (S ) − v(S \ {i})] . φ i = n −1 2
With the distinction between voting rights and voting power, proportionality should no longer be one share-one vote or voting rights according to cash flow rights but rather voting power according to cash flow rights. This means that disproportionality should be defined as φ1 /c1 , where φ1 is the largest shareholder’s Shapley–Shubik index and c1 is her relative share of the cash flow rights, instead of v1 /c1 , where v1 is her relative share of the voting rights. In order to disentangle disproportionality, it is necessary to be more careful though. The set of shareholders, N, can be defined either in terms of voting rights or in terms of cash flow rights and then voting power reflects either actual influence (φ1v ) or influence in the situation where the voting rights equals cash flow rights (φ1c ). There may be disproportionality in the above sense in both cases. The difference is due to the wedge between voting rights and cash flow rights. Disproportionality can thus be disentangled in the following way: Aggregate ≡ Structural ≡
φ1v
(3)
c1
φ1c
(4)
c1
Non-structural ≡
φ1v c1
−
φ1c c1
.
(5)
Structural assumes no wedge between voting rights and cash flow rights; it is the disproportionality that the ownership structure in itself may cause. Non-structural is the disproportionality that the control enhancing mechanisms may cause. Previous papers have only focused on aggregate disproportionality using voting rights instead of voting power. 3. Data and results
(1)
S ⊆N ,i∈S
• ΦSS ({N , v}) := φ {φ1 , . . . , φn }, where (s − 1)! (n − s)! [v (S ) − v(S \ {i})] . φi = n! S ⊆N ,i∈S
2.2. Disproportionality and how to disentangle it
(2)
For the Banzhaf index, we can say that shareholder i is pivotal for a particular coalition if i’s leaving this coalition turns it from a winning to a non-winning one. The Banzhaf index for shareholder i can then be interpreted as the proportion among all possible coalitions (2n ) for which shareholder i is pivotal. For the Shapley–Shubik index, consider all possible sequences in which the n shareholders can join a coalition one by one. We can then say that shareholder i is pivotal for a particular sequence if i’s joining the coalition of all shareholders preceding i in the sequence turns this coalition from a non-winning to a winning one. The Shapley–Shubik index can thus be interpreted as the proportion among all such sequences (n!) for which shareholder i is pivotal. The Banzhaf index does not consider the order or the sequence of shareholders in a coalition important; it simply considers all possible coalitions. The Shapley–Shubik index on the other hand is analogous to stating that if a coalition is large enough to win, it should avoid accepting additional shareholders, since these new shareholders will demand a share of the payoff available to the winning coalition without contributing essential votes to the coalition. In other words, a smaller winning coalition is preferable because it has a larger group of minority shareholders to extract rents from. This index seems to fit the agency problem between large and small shareholders well.
To estimate voting power, one needs an account of the ownership structure. This data requirement is different from (more demanding than) that of the largest shareholder’s relative share of the voting rights. In most countries, however, small shareholders are exempted from disclosing their ownership stakes, necessitating an assumption about these small shareholders. Two procedures can be found in the literature. One assumes that the unobserved shareholders are not influential, the other assumes that they are influential with some positive probability. Because I do not want to inflict powerlessness on small shareholders by construction, I assume that each small shareholder holds one percent of the votes and then add shareholders until the joint votes of all shareholders add up to 100%. I use the publicly available ownership structure data from Faccio and Lang (2002). This data provides information about ownership structures (subject to the limitations set by disclosure requirements) and deviations from one share-one vote for listed firms in thirteen European countries. I augment the data with financial information from the Worldscope database in order to test the effect of differences between voting rights and cash flow rights on the value of outside equity. Having compiled a feasible testing data set, I estimate Huber regression coefficients from the following model: Yi = β0 + β1 Disproportionalityi
+ β2 Disproportionalityi ∗ Quality +
βk Xi,k + ui
(6)
k
where Yi is an approximation of Tobin’s Q for firm i, Disproportionalityi is a measure of deviation from proportionality
T. Poulsen / Economics Letters 117 (2012) 743–745 Table 1 The effect of disproportionality in the value of outside equity. Wedge
4. Conclusion
Voting power Aggregate
Structural
Non-structural
−0.830*** (0.174) 0.335***
−0.021***
−0.140***
−0.012
(0.006) 0.011***
(0.030) 0.019***
(0.007) 0.007***
Control variables Industry dummies
(0.064) Yes Yes
(0.002) Yes Yes
(0.004) Yes Yes
(0.003) Yes Yes
Sample size R2
2868 0.196
2868 0.199
2868 0.206
2868 0.206
Disproportionality Disproportionality * Quality
745
Note: Standard errors in parentheses. *** Indicate that the coefficient estimates are statistically significantly different from 0 at the 1% level.
between influence and investment, and Xi contains relevant firm characteristics identified in the literature.5 Disproportionality is interacted with a measure of institutional quality instead of having a country dummy in Xi . This is preferable because it allows a ranking of countries. ui is a random error. Table 1 presents the results. For comparison, the table presents the result when disproportionality is defined as the difference between the largest shareholder’s voting rights and cash flow rights (wedge). The result is in line with the existing literature, i.e., there is a negative relationship between the approximation of Tobin’s Q and the wedge between voting rights and cash flow rights. As one would expect, institutional quality alleviates the negative effect. I then substitute the wedge with the aggregate disproportionality from Eq. (3) and rerun the model. The result is also in line with the existing literature, i.e., it is also capable of capturing the negative relationship. And, again, institutional quality alleviates the effect. Note what happens when disproportionality is disentangled into structural and nonstructural disproportionality: structural disproportionality drives the aggregate effect. By far, it has the largest impact on the value of outside equity.
5 I use the market-to-book ratio as my approximation of Tobin’s Q . I use the antidirector index by La Porta et al. (1998) as my approximation of institutional quality. Xi contains the largest shareholder’s investment and approximations of firm size, leverage, tangibility, and sales growth.
Using a straightforward measure such as the difference between voting rights and cash flow rights to investigate the effect of disproportionality on the value of outside equity is not ideal. I propose a measure based on voting power rather than voting rights and show the importance of noticing the difference; it is a fallacy to equate disproportionality and the mere existence of control enhancing mechanisms because a difference between influence and investment may exist without these mechanisms. I have shown how this can be realized if one thinks of influence in terms of voting power rather than voting rights. References Adams, R., Ferreira, D., 2008. One share-one vote: the empirical evidence. Review of Finance 12, 51–91. Banzhaf, J., 1965. Weighted voting doesn’t work: a mathematical analysis. Rutgers Law Review 19, 317–343. Burkart, M., Lee, S., 2008. One share-one vote: the theory. Review of Finance 12, 1–49. Claessens, S., Djankov, S., Fan, J., Lang, L., 2002. Disentangling the incentive and entrenchment effects of large shareholdings. The Journal of Finance 57, 2741–2771. Demsetz, H., Lehn, K., 1985. The structure of corporate ownership: causes and consequences. Journal of Political Economy 93, 1155–1177. Faccio, M., Lang, L., 2002. The ultimate ownership of Western European corporations. Journal of Financial Economics 65, 365–395. Himmelberg, C., Hubbard, R., Palia, D., 1999. Understanding the determinants of managerial ownership and the link between ownership structure and performance. Journal of Financial Economics 53, 353–384. La Porta, R., Lopez de Silanes, F., Shleifer, A., Vishny, R., 1998. Law and finance. Journal of Political Economy 106, 1113–1155. McConnell, J., Servaes, H., 1990. Additional evidence on equity ownership and corporate value. Journal of Financial Economics 27, 595–612. Morck, R., Shleifer, A., Vishny, R., 1988. Management ownership and market valuation: an empirical analysis. Journal of Financial Economics 20, 293–316. Shapley, L., Shubik, M., 1954. A method for evaluating the distribution of power in a committee system. The American Political Science Review 48, 787–792. Stulz, R., 1988. Managerial control of voting rights: financing policies and the market for corporate control. Journal of Financial Economics 20, 25–54.
Contents lists available at SciVerse ScienceDirect
Economics Letters journal homepage: www.elsevier.com/locate/ecolet
Disentangling disproportionality Thomas Poulsen ∗ Copenhagen Business School, Department of International Economics and Management, Porcelaenshaven 24 A, 2000 Frederiksberg, Denmark
article
info
Article history: Received 21 March 2011 Received in revised form 22 August 2012 Accepted 23 August 2012 Available online 27 August 2012
abstract The literature on deviations from one share-one vote seems to ignore that a difference between influence and investment, i.e., disproportionality, may exist without control enhancing mechanisms such as dual class shares. I propose a method to disentangle disproportionality and argue for its relevance. The consequences are documented on a testing data set. © 2012 Elsevier B.V. All rights reserved.
JEL classification: G32 G34 Keywords: Ownership structure Disproportionality Voting power Firm value
1. Introduction A certain type of agency problem follows from ownership structures with both large and small shareholders. When a large shareholder controls a firm, the standard assumption that the firm should be run so as to maximize its value may conflict with the large shareholder’s utility maximization.1 A series of papers find a negative relationship between the size of the largest shareholder and the value of outside equity, indicating that such a conflict of interest indeed exists.2 , 3 This conflict is easily aggravated by control enhancing mechanisms such as dual-class shares since they provide the owner of the superior voting shares with more influence (voting rights) than what is warranted by her investment (cash flow rights). When economic rents are distributed according to influence (voting rights) but paid according to investment (cash flow rights), a difference between voting rights and cash flow rights clearly creates obscure incentives. The effect has been studied by
∗
Tel.: +45 38152372. E-mail address: [email protected].
1 Note that this is not a formal agency problem in the sense that no explicit contracts exist. Rather, it is a conflict of interest. 2 This strand of literature dates back to Stulz (1988), Morck et al. (1988), and McConnell and Servaes (1990). Recent reviews can be found in Burkart and Lee (2008) and Adams and Ferreira (2008). 3 Trying to account for the endogeneity of ownership structures, this relationship has been questioned by e.g. Demsetz and Lehn (1985) and Himmelberg et al. (1999). 0165-1765/$ – see front matter © 2012 Elsevier B.V. All rights reserved. doi:10.1016/j.econlet.2012.08.036
e.g. Claessens et al. (2002) who find that an approximation of Tobin’s Q increases with the largest shareholder’s cash flow rights but decreases with the wedge between voting rights and cash flow rights. What this paper and other papers on deviations from one share-one vote seem to ignore is that a difference between influence and investment may exist without control enhancing mechanisms. The ownership structure in itself may provide the largest shareholder with more influence than what is warranted by her investment. This can be realized if one thinks of influence in terms of voting power rather than voting rights. Papers on disproportionality ought to notice the difference between these two types. In the next section, I will propose a method to disentangle them. Then, I will present a testing data set and illustrate the importance of noticing the difference. Section 4 concludes. 2. Methodology Power always manifests itself in a relational manner.4 One cannot meaningfully say that a particular shareholder has power without specifying the role of the remaining shareholders in the relationship as well. For this reason, the method is grounded in the game theoretic idea of voting power instead of the
4 The terms ‘‘influence’’ and ‘‘power’’ are used as synonyms. However, one can make a distinction between influence as a more general concept and power as intended influence.
744
T. Poulsen / Economics Letters 117 (2012) 743–745
simple dichotomy between control and no control based on some arbitrary criterion in terms of the voting rights of the largest shareholder. Before presenting the voting power index, it is important to mention that power indices measure a priori voting power. In general, game theory represents an abstract model of decision making, not the social reality of decision making itself. A priori voting power is the component of a posteriori voting power that shareholders derive solely from the decision rule, computed without regard to specific interests and preferences and the nature of the proposal to be voted upon. One can think of it as formal power as given by the constitutional rules of a collectivity. 2.1. Choosing the right index A simple voting game is a pair (N , v), where N = {1, . . . , n} is a set of shareholders and v is a characteristic function mapping each non-empty subset S ⊆ N (a coalition where s represents the number of shareholders in the coalition) to 0 (non-winning) or 1 (winning), such that: 1. v (∅) = 0 (the empty coalition is non-winning) and v (N ) = 1 (the coalition of all shareholders is winning), 2. there exists at least one subset S ⊆ N such that v (S ) = 1 (there is at least one winning coalition), 3. for all subsets S , T ⊆ N , S ⊆ T implies v(S ) ≤ v(T ) (a superset of a winning coalition is also winning), 4. for all subsets S ⊆ N , v (S ) + v(N \ S ) ≤ 1 (for any partition of the set of shareholders into two disjoint coalitions, at most one is winning). Such a game is fully specified once the distribution of voting weights and the decision-making rule are given. A power index is a function Φ that maps a voting game to a vector of real numbers, {φ1 , . . . , φn }, and φi is the voting power of shareholder i. The Banzhaf (1965) index (Bz) and the Shapley and Shubik (1954) index (SS) are instances of such functions:
• ΦBz ({N , v}) := φ {φ1 , . . . , φn }, where 1 [v (S ) − v(S \ {i})] . φ i = n −1 2
With the distinction between voting rights and voting power, proportionality should no longer be one share-one vote or voting rights according to cash flow rights but rather voting power according to cash flow rights. This means that disproportionality should be defined as φ1 /c1 , where φ1 is the largest shareholder’s Shapley–Shubik index and c1 is her relative share of the cash flow rights, instead of v1 /c1 , where v1 is her relative share of the voting rights. In order to disentangle disproportionality, it is necessary to be more careful though. The set of shareholders, N, can be defined either in terms of voting rights or in terms of cash flow rights and then voting power reflects either actual influence (φ1v ) or influence in the situation where the voting rights equals cash flow rights (φ1c ). There may be disproportionality in the above sense in both cases. The difference is due to the wedge between voting rights and cash flow rights. Disproportionality can thus be disentangled in the following way: Aggregate ≡ Structural ≡
φ1v
(3)
c1
φ1c
(4)
c1
Non-structural ≡
φ1v c1
−
φ1c c1
.
(5)
Structural assumes no wedge between voting rights and cash flow rights; it is the disproportionality that the ownership structure in itself may cause. Non-structural is the disproportionality that the control enhancing mechanisms may cause. Previous papers have only focused on aggregate disproportionality using voting rights instead of voting power. 3. Data and results
(1)
S ⊆N ,i∈S
• ΦSS ({N , v}) := φ {φ1 , . . . , φn }, where (s − 1)! (n − s)! [v (S ) − v(S \ {i})] . φi = n! S ⊆N ,i∈S
2.2. Disproportionality and how to disentangle it
(2)
For the Banzhaf index, we can say that shareholder i is pivotal for a particular coalition if i’s leaving this coalition turns it from a winning to a non-winning one. The Banzhaf index for shareholder i can then be interpreted as the proportion among all possible coalitions (2n ) for which shareholder i is pivotal. For the Shapley–Shubik index, consider all possible sequences in which the n shareholders can join a coalition one by one. We can then say that shareholder i is pivotal for a particular sequence if i’s joining the coalition of all shareholders preceding i in the sequence turns this coalition from a non-winning to a winning one. The Shapley–Shubik index can thus be interpreted as the proportion among all such sequences (n!) for which shareholder i is pivotal. The Banzhaf index does not consider the order or the sequence of shareholders in a coalition important; it simply considers all possible coalitions. The Shapley–Shubik index on the other hand is analogous to stating that if a coalition is large enough to win, it should avoid accepting additional shareholders, since these new shareholders will demand a share of the payoff available to the winning coalition without contributing essential votes to the coalition. In other words, a smaller winning coalition is preferable because it has a larger group of minority shareholders to extract rents from. This index seems to fit the agency problem between large and small shareholders well.
To estimate voting power, one needs an account of the ownership structure. This data requirement is different from (more demanding than) that of the largest shareholder’s relative share of the voting rights. In most countries, however, small shareholders are exempted from disclosing their ownership stakes, necessitating an assumption about these small shareholders. Two procedures can be found in the literature. One assumes that the unobserved shareholders are not influential, the other assumes that they are influential with some positive probability. Because I do not want to inflict powerlessness on small shareholders by construction, I assume that each small shareholder holds one percent of the votes and then add shareholders until the joint votes of all shareholders add up to 100%. I use the publicly available ownership structure data from Faccio and Lang (2002). This data provides information about ownership structures (subject to the limitations set by disclosure requirements) and deviations from one share-one vote for listed firms in thirteen European countries. I augment the data with financial information from the Worldscope database in order to test the effect of differences between voting rights and cash flow rights on the value of outside equity. Having compiled a feasible testing data set, I estimate Huber regression coefficients from the following model: Yi = β0 + β1 Disproportionalityi
+ β2 Disproportionalityi ∗ Quality +
βk Xi,k + ui
(6)
k
where Yi is an approximation of Tobin’s Q for firm i, Disproportionalityi is a measure of deviation from proportionality
T. Poulsen / Economics Letters 117 (2012) 743–745 Table 1 The effect of disproportionality in the value of outside equity. Wedge
4. Conclusion
Voting power Aggregate
Structural
Non-structural
−0.830*** (0.174) 0.335***
−0.021***
−0.140***
−0.012
(0.006) 0.011***
(0.030) 0.019***
(0.007) 0.007***
Control variables Industry dummies
(0.064) Yes Yes
(0.002) Yes Yes
(0.004) Yes Yes
(0.003) Yes Yes
Sample size R2
2868 0.196
2868 0.199
2868 0.206
2868 0.206
Disproportionality Disproportionality * Quality
745
Note: Standard errors in parentheses. *** Indicate that the coefficient estimates are statistically significantly different from 0 at the 1% level.
between influence and investment, and Xi contains relevant firm characteristics identified in the literature.5 Disproportionality is interacted with a measure of institutional quality instead of having a country dummy in Xi . This is preferable because it allows a ranking of countries. ui is a random error. Table 1 presents the results. For comparison, the table presents the result when disproportionality is defined as the difference between the largest shareholder’s voting rights and cash flow rights (wedge). The result is in line with the existing literature, i.e., there is a negative relationship between the approximation of Tobin’s Q and the wedge between voting rights and cash flow rights. As one would expect, institutional quality alleviates the negative effect. I then substitute the wedge with the aggregate disproportionality from Eq. (3) and rerun the model. The result is also in line with the existing literature, i.e., it is also capable of capturing the negative relationship. And, again, institutional quality alleviates the effect. Note what happens when disproportionality is disentangled into structural and nonstructural disproportionality: structural disproportionality drives the aggregate effect. By far, it has the largest impact on the value of outside equity.
5 I use the market-to-book ratio as my approximation of Tobin’s Q . I use the antidirector index by La Porta et al. (1998) as my approximation of institutional quality. Xi contains the largest shareholder’s investment and approximations of firm size, leverage, tangibility, and sales growth.
Using a straightforward measure such as the difference between voting rights and cash flow rights to investigate the effect of disproportionality on the value of outside equity is not ideal. I propose a measure based on voting power rather than voting rights and show the importance of noticing the difference; it is a fallacy to equate disproportionality and the mere existence of control enhancing mechanisms because a difference between influence and investment may exist without these mechanisms. I have shown how this can be realized if one thinks of influence in terms of voting power rather than voting rights. References Adams, R., Ferreira, D., 2008. One share-one vote: the empirical evidence. Review of Finance 12, 51–91. Banzhaf, J., 1965. Weighted voting doesn’t work: a mathematical analysis. Rutgers Law Review 19, 317–343. Burkart, M., Lee, S., 2008. One share-one vote: the theory. Review of Finance 12, 1–49. Claessens, S., Djankov, S., Fan, J., Lang, L., 2002. Disentangling the incentive and entrenchment effects of large shareholdings. The Journal of Finance 57, 2741–2771. Demsetz, H., Lehn, K., 1985. The structure of corporate ownership: causes and consequences. Journal of Political Economy 93, 1155–1177. Faccio, M., Lang, L., 2002. The ultimate ownership of Western European corporations. Journal of Financial Economics 65, 365–395. Himmelberg, C., Hubbard, R., Palia, D., 1999. Understanding the determinants of managerial ownership and the link between ownership structure and performance. Journal of Financial Economics 53, 353–384. La Porta, R., Lopez de Silanes, F., Shleifer, A., Vishny, R., 1998. Law and finance. Journal of Political Economy 106, 1113–1155. McConnell, J., Servaes, H., 1990. Additional evidence on equity ownership and corporate value. Journal of Financial Economics 27, 595–612. Morck, R., Shleifer, A., Vishny, R., 1988. Management ownership and market valuation: an empirical analysis. Journal of Financial Economics 20, 293–316. Shapley, L., Shubik, M., 1954. A method for evaluating the distribution of power in a committee system. The American Political Science Review 48, 787–792. Stulz, R., 1988. Managerial control of voting rights: financing policies and the market for corporate control. Journal of Financial Economics 20, 25–54.