Tag: ownership and control
Defining the MENA region
There is no standard definition of the MENA region, however, as the name indicates, the term compromises two main areas. The first part of the term, Middle East, creates a problem of definition as the geographical area does not have precisely defined borders. The Middle East was first used as term by the British in ...
Investor Protection and Dividend Policy
LLSV (2000b) show that countries with strong shareholder rights are able to force firms to disgorge cash and pay higher dividends. They find that dividend policies vary across legal regimes in ways consistent with a particular version of the agency theory of dividends. Specifically, firms in common law countries, where investor protection is typically better, ...
Shareholders’ Protection and the Ownership Pattern
The image of the public corporation as a firm owned by dispersed shareholders, while control is concentrated in the hands of management, as suggested by Berle and Means (1932), has been shown to be the exception rather than the rule in most countries around the world (La Porta et al., 1999; Coffee, 2001). Different studies ...
Sanctions against Minority Shareholders Expropriations
The law can deter wrongdoing by using sanctions such as fines and prison terms against abusive self-dealing by the controlling shareholder and those who approved the transaction. Fines and criminal sanctions can be imposed upon the interested director and the approving body ranging from criminal intent to obtaining unlawful profits to breaching duties of care ...
Remedies Against Minority Shareholders Expropriations
Legal strategies against minority shareholders expropriations are of course pointless without appropriate remedies and enforcement mechanisms. In order to have appropriate remedies, minority shareholders should be easily able to prove the wrongdoing (Djankov et al., 2008; Conac et al., 2007). Accordingly, ex post disclosure is required first in annual reports and periodic filings which in ...
Self-Dealing; Approval and Disclosures Procedural Requirements
Legal systems often impose procedural requirements on self-dealing transactions to determine their structure and to encourage companies to follow a given procedure thereby making it harder for shareholder plaintiff’s to challenge procedurally fair transactions (Conac et al., 2007). Djankov et al. (2008) give examples of how the law can regulate a transaction involving self-dealing so ...
Legal System Strategies against Self-Dealing
It is appropriate to note that self-dealing transactions traditionally fall within the scope of insider’s fiduciary duty of loyalty (Enriques, 2000, p. 5), that is, the duty to subordinate their own interests to those of the corporation whenever a conflict arises (Henn and Alexander, 1983). Often, the rationale for the regulation of self-dealing transactions is ...
Explanations for Differences in Levels of Investor Protection
Although, La Porta and colleagues pointed out the importance of legal foundation for investor protection, other theories argue that legal determinants are complex. These theories suggest that the differences in the investor protection level around the world are determined by other variables, particularly important exogenous variables are those related to political economy considerations. Politics can ...
Legal origin and Shareholders protection
In the past decade, LLSV spearheaded a rapidly evolving mass of literature emphasising the part played by legal institutions in moulding the national pattern of financial management and economic growth. What the literature argued was a core concept for corporate governance was the protection of investor rights against the expropriation by insiders and legal enforcement ...
Agency Problem
For several decades, the separation issue between ownership and control has been reflected in agency theory, where providers of services are regarded as agents of the people on whose behalf the service is performed (Jensen and Meckling, 1976; Stulz, 1988). According to Jensen and Meckling, the relation between the financiers and managers – the agency ...