[We study the change in government control of privatized firms in OECD (Organisation for Economic Co-operation and Development) countries. At the end of 2000, after the largest privatization wave in history, governments retained control of 62.4% of privatized firms. In civil law countries, governments tend to retain large ownership positions, whereas in common law countries they typically use golden shares. When we combine these two mechanisms, we find no association between a country's legal tradition and the extent of government control. Rather, we document more prevalent government influence over privatized firms in countries with proportional electoral rules and with a centralized system of political authority. of political authority.]

Examination of firms in 47 countries shows a widespread overlap of controlling shareholders and top officers who are connected with national parliaments or governments, particularly in countries with higher levels of corruption, with barriers to foreign investment, and with more transparent systems. Connections are diminished when regulations set more limits on official behavior. Additionally, I show that the announcement of a new political connection results in a significant increase in value.

[Using new data for the universe of firms covered in Amadeus, we reconstruct the portfolios of shareholders who hold equity stakes in private- and publicly traded European firms. We find great heterogeneity in the degree of portfolio diversification across large shareholders. Exploiting this heterogeneity, we document that firms controlled by diversified large shareholders undertake riskier investments than firms controlled by nondiversified large shareholders. The impact of large shareholder diversification on corporate risk-taking is both economically and statistically significant. Our results have important implications at the policy level because they identify one channel through which policy changes can improve economic welfare.]

We study the change in government control of privatized firms in OECD (Organisation for Economic Co-operation and Development) countries. At the end of 2000, after the largest privatization wave in history, governments retained control of 62.4% of privatized firms. In civil law countries, governments tend to retain large ownership positions, whereas in common law countries they typically use golden shares. When we combine these two mechanisms, we find no association between a country's legal tradition and the extent of government control. Rather, we document more prevalent government influence over privatized firms in countries with proportional electoral rules and with a centralized system of political authority. The Author 2008. Published by Oxford University Press on behalf of The Society for Financial Studies. All rights reserved. For Permissions, please e-mail: [email protected]., Oxford University Press.

We develop an extensive mapping of the revolving door phenomenon by examining the work experience of 420,153 individuals in top corporate positions at 12,869 firms. More than half of these firms have at least one such individual with prior experience in one of 187 executive branch agencies. We find that firms are more likely to receive procurement contracts following the appointment of a former regulator transitioning within 2 years of leaving the agency, a result consistent with the “knowledge” hypothesis. Less-complex contracts signed following the appointment of former regulators are more likely to be renegotiated, increasing costs for the government.

We analyze the ultimate ownership and control of 5,232 corporations in 13 Western European countries. Typically firms are widely held (36.93%) or family controlled (44.29%). Widely held firms are more important in the UK and Ireland, family controlled firms in continental Europe. Financial and large firms are more likely widely held, while non-financial and small firms are more likely family controlled. State control is important for larger firms in certain countries. Dual class shares and pyramids enhance the control of the largest shareholders, but overall there are significant discrepancies between ownership and control in only a few countries.

We use a multitude of tax reforms across the Organisation for Economic Co-Operation and Development (OECD) countries as natural experiments to estimate the market value of the tax benefits of debt financing. We report time-series evidence that tax reforms are followed by large changes in the value of corporate equity. However, the impact of tax reforms is greatly mitigated by the presence of leverage. The value of debt tax savings is greater among top taxpayers, among highly profitable firms, and in countries where tax laws are more strongly enforced. Importantly, the value of debt tax savings is in line with the benchmark implied by a traditional approach.

We use nearly 500 shifts in statutory corporate and personal income tax rates as natural experiments to assess the effect of corporate and personal taxes on capital structure. We find both corporate and personal income taxes to be significant determinants of capital structure. Based on ex post observed summary statistics, across Organisation for Economic Co-Operation and Development (OECD) countries, taxes appear to be as important as other traditional variables in explaining capital structure choices. The results are stronger among corporate tax payers, dividend payers, and companies that are more likely to have an individual as the marginal investor.

We study the relationship between the presence of politicians on mobile service operators’ boards and the regulation of the mobile telecommunication sector. In countries in which mobile operators have deeper connections with local politicians, we find that rules promote competition less, even after we control for country fixed effects and a country’s level of corruption. Rules that promote competition are associated with lower concentration and lower prices. There is no evidence that procompetition rules are associated with worse quality, lower investments, less employment, or lower wages. Thus, all the evidence points to political connections being a form of rent-seeking.