Tunneling
Working Paper
Tunneling Through Group Trademarks
This study documents how group trademarks, comprising the business group’s name and logo, can be used for the benefit of controlling families at the expense of outside minority shareholders. Using a sample of business groups in Korea, we find...Read more
Related Party Transactions in France - A Critical Assessment
In France, the regulation of related party transactions (RPTs) involves three steps following the notification to the board of an RPT. First, the board gives its prior authorisation to the transaction. Those who are...Read more
Powering Preemptive Rights with Presubscription Disclosure
Preemptive rights can prevent cheap-issuance tunneling by a controller when outside investors know that the offered securities are cheap. But when outsiders cannot tell whether the securities are cheap or overpriced, preemptive rights fail to...Read more
The Law and (Some) Finance of Related Party Transactions: An Introduction
This paper is the introductory chapter of Luca Enriques and Tobias Tröger (eds.), The Law and Finance of Related Party Transactions (Cambridge University Press: forthcoming). Its goal is to sketch out the individual chapters’ contributions to the...Read more
Optimally Restrained Tunneling: The Puzzle of Controlling Shareholders’ “Generous” Exploitation in Bad-Law Jurisdictions
Although controlling shareholder agency problems have been well studied so far, many questions still remain unanswered. In particular, an important puzzle in “bad-law” jurisdictions is: why some controlling shareholders (“roving controllers”)...Read more
Cheap-Stock Tunneling Around Preemptive Rights
Preemptive rights are thought to protect minority shareholders from cheap-stock tunneling by a controlling shareholder. We show that preemptive rights, while making cheap-stock tunneling more difficult, cannot prevent it when asymmetric...Read more
RPTs in SOEs: Tunneling, Propping, and Policy Channeling
This essay, prepared for a volume on related-party transactions (RPTs), explores the economic, legal and policy challenges associated with RPTs in state-owned enterprises (SOEs). We show that RPTs in SOEs differ from RPTs in privately owned...Read more
The Effect of Minority Veto Rights on Controller Tunneling
A central challenge in the regulation of controlled firms is curbing controller tunneling. As independent directors and fiduciary duties are widely seen as not up to the task, a number of jurisdictions have given minority shareholders veto rights...Read more
Regulation and self-regulation of related party transactions in Italy: An empirical analysis
This paper assesses how Italian companies have implemented the regulation on related party transactions enacted by Consob in 2010. Companies have been given some degree of freedom in devising their internal codes: they may ?opt-up? or ?opt-down?...Read more
How Does Law Affect Finance? An Examination of Equity Tunneling in Bulgaria
We model and test the mechanisms through which securities law affects tunneling and tunneling affects firm valuation. In 2002, Bulgaria adopted securities law changes which limit two forms of equity tunneling – dilutive equity offerings and...Read more
Executive Compensation: When a Firm is a Business Group Member
This paper examines how executive pay is set when a firm is a business group member. Using Korea as a laboratory setting, we find that member firm?s cash compensation for its executives is positively linked to the stock performance of other...Read more