This paper studies the ownership connection between two units that share a common
controlling entity. Our results generate diverse organizations, including the horizontal
groups of US family firms and the hierarchical ownership of both multinationals and
European groups. The driver of ownership is the optimal capital structure associated with the tax-bankruptcy trade-off.
We also examine optimal mutations in response to dividend taxes, to caps on interest deductions and to ?no bailout? rules.
EU policy-makers have focused on the creation of a “Capital Market Union” to advance the economic vitality of the EU in the aftermath of the Global Financial Crisis of 2007-09 and the Eurozone crisis of 2011-13. The hope is that EU-wide capital...Read more
French listed companies can issue shares that confer two votes per share after a holding period of at least two years (loyalty shares with tenure voting rights). In 2014 the default rule changed from one-share-one-vote to loyalty shares. The...Read more
Short-termism has become a serious concern for corporate governance, and this has inspired a search for institutional arrangements to promote long-term decision-making. In this paper, we call attention to long-term ownership by industrial...Read more
We find that potential conflicts between majority and minority shareholders strongly influence how dividends respond to taxes. Examining the population of firms with proprietary microdata on all family relationships and a million individual tax...Read more