Benefits of control, capital structure and company growth
Abstract:This article studies the influence of the benefits of control on the capital structure and the growth of private companies for a sample of 8964 UK companies with limited liability observed for up to 5 years. It is hypothesized that companies in which existing owners would lose more control if they expanded, have smaller equity increases, are more highly levered and grow more slowly. Potential loss of control is measured as the difference in the probability of winning a vote for the largest owner before and after a hypothetical equity increase. Evidence is found that is consistent with the hypotheses.
Document Type: Research Article
Affiliations: Department of Industrial Economics and International Management, Centre for European Economic Research (ZEW), 68161 Mannheim, Germany
Publication date: November 1, 2008