One Share-One Vote: The Empirical EvidenceRenée Adams and Daniel Ferreira | Review of Finance
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The main question in most of the studies we survey is: Does disproportional ownership destroy shareholder value? We will argue that, while the literature has uncovered some robust evidence, this question has proven difficult to address empirically.
A related issue is whether the widespread use of mechanisms to unbundle cash flow rights from voting rights distorts the economy-wide allocation of capital (see esp. Morck et al. 2005). If promised returns to equity investors are too small because disproportional ownership creates too many opportunities for extracting private benefits, little outside equity will be supplied and serious underinvestment problems (or suboptimal allocations of capital) may occur. This may affect the development of well-functioning equity markets and may be a barrier to economic growth. On the other hand, with too few incentives to entrepreneurs in the form of private benefits, investment and innovation may also suffer (Allaire 2006).