Business, Management and Accounting
4 years ago

Corporate law may hinder efficient governance by overlooking private control benefits.

Corporate Ownership and Control
”The good, the bad, and the ugly” private benefits of control and their regulatory implications
Alessio M. Pacces

Paper Summary

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This paper explores how corporate governance is influenced by private benefits of control. It introduces a new category of private benefits called idiosyncratic PBC, in addition to distortionary and diversionary PBC. The study shows that legal protection of minority shareholders is important, but so is the exchange of corporate control. Legal institutions can impact corporate governance efficiency by not providing entitlements to uncontested control. Regulation may also hinder the takeover process by restricting side payments that support efficient bargaining for corporate control.