T. van der Goot
- Cash flow rights versus voting rights: Corporate governance and firm value of Dutch listed firms
- Number of pages
- onbekend: Afdeling Business Studies
- Document type
- Working paper
- Faculty of Economics and Business (FEB)
- Amsterdam Business School Research Institute (ABS-RI)
The paper examines the relation between different forms of ownership and firm performance on the Dutch stock market. By using unique data on both cash flow and voting rights in the possession of a firm's board of directors and its large shareholders, the paper presents detailed analyses of corporate governance on the Dutch capital market. The results on the relationship between ownership structure and firm value differ from other studies due to the phenomenon of concentrated ownership in combination with the use of certificates of stock. As a consequence of the latter, there is a divergence between stock ownership and control. The analysis partly confirms the hypothesis of Demsetz and Lehn (1985) who argue that ownership is determined by firm size, control potential, regulation and amenity potential. We find no evidence for an effect of managerial ownership on firm value. However, a significant relationship is observed between Tobin's Q, and the cash flow and voting rights of the largest shareholder and so-called important shareholders (larger than a 5% stake), respectively. Because many Dutch firms often issue certificates of stock without voting rights, the voting rights owned by the largest and important shareholders are stronger associated with Tobin's Q than the cash flow rights. Our empirical results indicate that ownership with or without voting rights significantly effects a market-based measure of value, such as Tobin's Q, but not an accounting based profitability measure. This paper provides evidence that the measure of firm value and the context of the research are both key for the variety in findings that have characterized earlier research on the relationship between ownership and firm value.
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