Abstract
We hypothesize that in a country with lax corporate governance rules Tobin's Q is maximized when controlholders' vote approaches the supermajority level. In this holding range, controlholders do not possess extreme power (cannot pass supermajority decisions), nor do they feel a strong temptation to loot the firm (which largely belongs to them). Using a sample of 144 Israeli firms, we find that Tobin's Q is maximized when control group vote reaches 67%. This evidence is strong when ownership structure is treated as exogenous and weak when it is considered endogenous. Other ownership structure variables do not appear to have a significant valuation effect.
| Original language | English |
|---|---|
| Title of host publication | Issues in Corporate Governance and Finance |
| Editors | Mark Hirschey, Kose John, Anil Makhija |
| Pages | 27-47 |
| Number of pages | 21 |
| DOIs | |
| State | Published - 2007 |
Publication series
| Name | Advances in Financial Economics |
|---|---|
| Volume | 12 |
| ISSN (Print) | 1569-3732 |
Bibliographical note
Funding Information:The paper has benefited from the comments of Yakov Amihud. Any remaining errors are our own. Financial assistance from the Sapir Fund at Tel-Aviv University is gratefully acknowledged.
Funding
The paper has benefited from the comments of Yakov Amihud. Any remaining errors are our own. Financial assistance from the Sapir Fund at Tel-Aviv University is gratefully acknowledged.
| Funders | Funder number |
|---|---|
| Tel-Aviv University |