Market-Value-Maximizing Ownership Structure when Investor Protection is Weak

Beni Lauterbach, Efrat Tolkowsky

Research output: Chapter in Book/Report/Conference proceedingChapterpeer-review

2 Scopus citations


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 languageEnglish
Title of host publicationIssues in Corporate Governance and Finance
EditorsMark Hirschey, Kose John, Anil Makhija
Number of pages21
StatePublished - 2007

Publication series

NameAdvances in Financial Economics
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.


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