Publications in 2017
Agency Problem and Ownership Structure: Outside Blockholder As a Signal
|Author: Stepanov S., Suvorov A.|
Journal of Economic Behavior & Organization No. 133., January 2017, P. 87-107
We propose a model in which an entrepreneur, seeking outside financing, sells a large equity share to an outside blockholder in order to signal his low propensity to extract private benefits. A conventional theoretical rationale for the presence of an outside blockholder is mitigation of the agency problem via some type of monitoring or intervention. Our model provides a novel insight: outside blockholders may be attracted by firms with low, rather than high, agency problems. Our result yields a new implication for the interpretation of an often documented positive relationship between outside ownership concentration in a firm and its market valuation: such relationship may be driven by "sorting" rather than by a direct effect of blockholder monitoring. In fact, we show that the positive correlation may arise even if the blockholder derives private benefits and has no positive impact on the value of small shares. Finally, we argue that our analysis may help explain why the market reacts more favorably to private placements of equity as opposed to public issues.
Regional Inflation, Banking Integration and Dollarization
|Author: Sokolov V., Brown M., De Haas R.|
Review of Finance May 2017
We exploit variation in consumer price inflation across 71 Russian regions to examine the relationship between the perceived stability of the domestic currency and financial dollarization. Our results show that regions with higher inflation experience an increase in the dollarization of household deposits and a decrease in the dollarization of loans. The impact of inflation on credit dollarization is weaker in regions with less integrated banking markets. This suggests that the currency-portfolio choices of households and firms are constrained by the asset-liability management of banks.
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