Control Rights, Pyramids, And The Measurement Of Ownership Concentration

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Executive Summary

The recent corporate governance literature has emphasised the distinction between control and cash-flow rights but has disregarded measurement issues. Control rights may be measured by immediate shareholder votes, the voting rights as traced through ownership chains, or voting power indices that may or may not trace ownership through chains. The authors compare the ability of various measures to identify the effects of ownership concentration on share valuation using a German panel data set. The widely-used weakest link principle does not perform well in this comparison.

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