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The role and effect of controlling shareholders in corporate governance

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Abstract

This paper examines two potentially contradictory effects of the presence of controlling shareholders. Controlling shareholders have been shown to be beneficial, as they generally have a long-term interest in the firm and are willing and able to monitor the actions of senior managers closely and decrease agency costs between shareholders and management (agency costs of Type I). However, they are also in a position to expropriate the firm’s assets, especially when they are actively involved in management (agency costs of Type II). More specifically, this article reviews how regulatory and legislative bodies have tried to curb the consumption of private benefits by controlling shareholders while preserving the beneficial aspects of their long-term interest and their monitoring role, the effect controlling shareholders on the application and effectiveness of corporate governance best practices as well as on the executive and board member remuneration.

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Authors and Affiliations

  1. Free University of Bozen-Bolzano, Bolzano, Italy

    Lucie Courteau & Paolo Giudici

  2. University of Siena, Siena, Italy

    Roberto Di Pietra

  3. University of Cagliari, Cagliari, Italy

    Andrea Melis

Authors
  1. Lucie Courteau
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  2. Roberto Di Pietra
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  3. Paolo Giudici
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  4. Andrea Melis
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Correspondence to Lucie Courteau.

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Courteau, L., Di Pietra, R., Giudici, P. et al. The role and effect of controlling shareholders in corporate governance. J Manag Gov 21, 561–572 (2017). https://doi.org/10.1007/s10997-016-9365-1

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