Ownership Structure and Corporate Decisions: Capital Structure, M&A Activity, and Acquisition Financing

The objective of this dissertation is to deepen our understanding of how large shareholders make decisions, since we recently experienced a significant increase in concentration of voting rights around the world, which has amplified their influence in corporate governance. Accordingly, this dissertation investigates the impact of the largest shareholder’s voting stake on corporate decisions across three distinct studies. The first study focuses on capital structure decisions, revealing a negative relationship between the voting stake of the largest shareholder and leverage. Family-controlled firms show a weaker association, emphasizing their desire to maintain control over the firm. The second study finds that a high concentration of voting rights decreases the likelihood of undertaking an acquisition, which aligns with the risk-reduction motive of large shareholders. While family identity influences capital structure decisions, no significant differences are observed in acquisition behavior. The third study examines how concentration of voting rights affects acquisition financing and reveals an aversion of large shareholders towards equity to prevent dilution. This aversion towards equity financing is particularly pronounced in the intermediate ownership range, where shareholders are most susceptible to a potential loss of control. Overall, the findings underscore the significance of risk reduction and control motives for large shareholders that potentially limit corporate growth. Considering the proposed reintroduction of multiple-vote shares by the European Commission, which are expected to result in an increased concentration of voting rights, these insights are particularly relevant.