A central challenge in the regulation of controlled firms is curbing rent extraction by controllers. As independent directors and fiduciary duties are often insufficient, some jurisdictions give minority shareholders veto rights over related-party transactions.
To assess these rights’ effectiveness, we exploit a 2011 Israeli reform that gave minority shareholders veto rights over related-party transactions, including the pay of controllers and their relatives (“controller executives”). We find that the reform curbed controller-executive pay and led some controller executives to resign or go with little or no pay in circumstances suggesting their pay would be rejected. These findings suggest that minority veto rights can be an effective corporate governance tool.
The E.U. Takeover Directive was passed twenty years ago with the main aim of fostering a single European takeover market. However, subsequent economic,...
In a canonical takeover model we let an informed large shareholder choose between making a bid or initiating a sale to another acquirer. Such takeover...
The phenomenon of groups of companies is very common in modern corporate reality. The empirical data on groups of companies are heterogeneous because...
We assemble cash flow data on all investments by Israeli pension providers in private equity and venture capital funds over nearly 20 years to evaluate...