Disentangling the Incentive and Entrenchment Effects of Large Shareholdings：（理的大量股权的激励和壕沟效应）.pdfVIP

THE JOURNAL OF FINANCE • VOL. LVII, NO. 6 • DECEMBER 2002 Disentangling the Incentive and Entrenchment Effects of Large Shareholdings STIJN CLAESSENS, SIMEON DJANKOV, JOSEPH P. H. FAN, and LARRY H. P. LANG* ABSTRACT This article disentangles the incentive and entrenchment effects of large owner- ship. Using data for 1,301 publicly traded corporations in eight East Asian econ- omies, we find that firm value increases with the cash-flow ownership of the largest shareholder, consistent with a positive incentive effect. But firm value falls when the control rights of the largest shareholder exceed its cash-flow ownership, con- sistent with an entrenchment effect. Given that concentrated corporate ownership is predominant in most countries, these findings have relevance for corporate gov- ernance across the world. THE EFFECTS OF OWNERSHIP STRUCTURES on the value of firms have been re- searched extensively, with the role of large investors receiving special atten- tion. Investors with large ownership stakes have strong incentives to maximize their firms’ value and are able to collect information and oversee managers, and so can help overcome one of the principal–agent problems in the modern corporation—that of conflicts of interest between shareholders and man- agers ~Jensen and Meckling ~1976!!. Large shareholders also have strong incentives to put pressure on managers or even to oust them through a proxy fight or a takeover. For example, Shleifer and Vishny ~1997, p. 754! point * University of Amsterdam and Centre for Economic Policy Research; World Bank and Centre for Economic Policy Research; Hong Kong University of Science and Technology; and Chinese University o