Corporate Control And Measurement Methods For Research

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. We 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. Furthermore, measures that trace control through ownership chains do not outperform those that rely on immediate ownership, thus questioning the role of pyramids in the separation of control and cash-flow rights. The paper emphasizes that there is a distinction between these two aspects of ownership even with out pyramids or preferred stock, identi fication of which requires measures that, like the Shapley-Shubik index, do not simply equate control rights with voting rights.The study on separation between control rights and cash flow rights is one of the most important themes in the area of corporate governance. The control mode and the degree of control about major shareholders of the listed companies need much more attention to study., Most of our current study focused on China or Japan, the United States and other countries of the listed companies, fewer studies for Germany.Additionally the study mainly based on a single measurement method on the control. Most of these methods is assumed to be the premise of their research:control rights equal to voting rights. It is difficult to have a unified standard when we measure the control rights of shareholders. There is a lot of different ways, which most straightforward is the shareholders'ability to influence the voting results on the general meeting of shareholders or the Board. However, these methods are often result quite different conclusions. Therefore, a correct and unambiguous control measurement method is very important.The author develop a new method which can prevent the defect of these, based on the current methods to measure the control of shareholders. This paper provides three main insights. First, most of our measures of ownership concentration can be used to identify a statistically and economically significant effect of ownership concentration on share valuation for our sample of German firms that is in line with corporate governance models.. Second, measures that trace control through own ership chains do not outperform those that rely on immediate ownership at the first tier level. This questions the widely held view that pyramids play an important role in separating control and cash flow rights of large owners. Third, the paper empha sises that there is a distinction between control and cash flow rights even without pyramids or preferred stock, identification of which requires measures that, like the Shapley-Shubik index, do not simply equate control rights with voting rights.