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Law and Ownership Reexamined

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  • Holderness, Clifford G.

Abstract

Sixteen measures of legal protections for public market investors, including the Anti-Director Rights Index, the Anti-Self- Dealing Index, and legal origins, are all unrelated to ownership concentration in a large and representative sample of firms from 32 countries. Furthermore, when laws were strengthened in a variety of countries, ownership either stayed the same or became more concentrated. The two theories behind the proposed negative relation of law and ownership concentration are inconsistent with each other and inconsistent with established empirical regularities. In sum, both the evidence and the theory are at odds with the influential proposition that large shareholdings are a response to weak legal protections for public market investors.

Suggested Citation

  • Holderness, Clifford G., 2016. "Law and Ownership Reexamined," Critical Finance Review, now publishers, vol. 5(1), pages 41-83, May.
    • Handle: RePEc:now:jnlcfr:104.00000029
    DOI: 10.1561/104.00000029
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    Citations

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    Cited by:

    1. Licht, Amir N. & Adams, Renee B., 2020. "Shareholders and Stakeholders around the World: The Role of Values, Culture, and Law in Directors' Decisions," LawFin Working Paper Series 13, Goethe University, Center for Advanced Studies on the Foundations of Law and Finance (LawFin).
    2. Erkan, Asligul & Fainshmidt, Stav & Judge, William Q., 2016. "Variance decomposition of the country, industry, firm, and firm-year effects on dividend policy," International Business Review, Elsevier, vol. 25(6), pages 1309-1320.
    3. Moshirian, Fariborz & Thi Nguyen, Thuy & Zhang, Bohui, 2022. "How does firm size explain cross-country differences in ownership concentration?," Journal of Multinational Financial Management, Elsevier, vol. 65(C).
    4. Booth, Laurence & Zhou, Jun, 2017. "Dividend policy: A selective review of results from around the world," Global Finance Journal, Elsevier, vol. 34(C), pages 1-15.
    5. Caselli, Stefano & Gatti, Stefano & Chiarella, Carlo & Gigante, Gimede & Negri, Giulia, 2023. "Do shareholders really matter for firm performance? Evidence from the ownership characteristics of Italian listed companies," International Review of Financial Analysis, Elsevier, vol. 86(C).

    More about this item

    Keywords

    Investors’ legal protections; Law and finance; Ownership concentration;
    All these keywords.

    JEL classification:

    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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