The Modern Firm, Corporate Governance and Investment
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The Modern Firm, Corporate Governance and Investment

Edited by Per-Olof Bjuggren and Dennis C. Mueller

This book explores the revolutionary development of the theory of the firm over the past 35 years. Despite rapid progress in the field, new developments in the microeconomic and industrial organization literature have been relatively scant. This book attempts to redress the balance by providing a comprehensive overview of the theory of the firm before moving on to examine firms and the organization of their economic activities. The contributors also investigate the impact of ownership structure and board composition on firm performance and study how the institutional framework of an economy affects investment decisions.
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Chapter 11: Contracting Around Ownership: Shareholder Agreements in France

Camille Madelon and Steen Thomsen


1 Camille Madelon and Steen Thomsen 1. INTRODUCTION A wealth of studies in economics, strategy and finance have examined the relationship between corporate ownership structure and performance (Hill and Snell, 1988, 1989; Holderness and Sheehan, 1988; McConnell and Servaes, 1990; Gedajlovic and Shapiro, 1998, 2002; Thomsen and Pedersen, 2000; De Miguel et al., 2004; Anderson and Reeb, 2003; Villalonga and Amit, 2006). Other studies have examined the effect of ownership structure on strategic decisions (Amihud and Lev, 1981; Hill and Snell, 1988, 1989; Graves, 1988; Baysinger et al., 1991; Lane et al., 1998; Denis et al., 1997, 1999; Allen and Phillips, 2000; David et al., 2001; Hoskisson et al., 2002; Lee and O’Neill, 2003; Desai et al., 2004; Lerner and Rajan, 2006; Mathews, 2006). Overall, this literature finds that corporate ownership structures matter to company behavior and value creation (for example, Shleifer and Vishny, 1997). Yet, there is a distinction to be made between the publicly observable formal ownership structure and what we are tempted to call the real ownership structure, namely the allocation of control, cash flow, and transfer rights, which results from implicit or explicit contracting among the various owners. Take for example Publicis, the world’s fourth largest communication group. The formal ownership structure points to two large owners in 2006: Dentsu, a Japanese based communication group, with circa 15 per cent of the equity, and Mrs Badinter, the founder’s daughter with 10 per cent of the equity. However, a closer look reveals a different picture. In 2002,...

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