Ultimate Control and Corporate Value : Evidence from the UK

This paper investigates the importance of ultimate control in determining corporate value in a sample of UK firms. Specifically, it examines the value relevance of three aspects: shareholdings with higher voting rights than cash flow rights; individual ultimate controllers; and mechanisms to exercise control. The results suggest that firm values fall only when a shareholder has at least twice as much voting rights than cashflow rights. Ultimate control exerted by institutional investors was shown to reduce firm values, as opposed to other types of investors or widely held firms. There was no significant evidence of an association between controlling mechanisms and value discounts