Expropriation of Minority Shareholders: A Study on Swedish Market between 1985 and 2007

Abstract: Based on a sample of company observations on the Stockholm Stock Exchange in the period 1985-2007, we find evidence that the tendency of largest shareholders to expropriate other shareholders rise with their control rights and the difference between their control rights and cash flow rights. Looking at different types of largest shareholders, for largest shareholders classified as financial institutions, spheres, individuals and private equity firms the tendency to expropriate other shareholders rises with ownership of control rights, while for financial institutions it also rises with the separation of control rights and cash flow rights. Based on a sample of company observations on the Stockholm Stock Exchange during the period 1997-2007, we find no correlations between the largest shareholder’s ownership of control rights or separation of control rights and cash flow rights and abnormal returns following an acquisition.