Corporate governance and ultimate control

This chapter investigates the role of macro corporate governance (legal and extra legal institutions) in determining the extent of ultimate excess control (i.e., the ownership-controls rights divergence of the ultimate owner) using a large sample of Asian and European companies. We find that the level of excess control is lower in countries with (1) good investor protection and better enforcement of information disclosure and (2) fairer competition laws, higher newspaper diffusion, and more regulated insider trading. Controlling for institutions subsumes the effect of firm-level determinants, as only leverage appears to be negatively and significantly related to excess control.