Abstract

We use a sample of 800 firms in eight East Asian countries to study the effect of ownership structure on value during the region’s financial crisis. The crisis negatively impacted firms’ investment opportunities, raising the incentives of controlling shareholders to expropriate minority investors. During the crisis, cumulative stock returns of firms in which managers have high levels of control rights, but have separated their control and cash flow ownership, are 10 to 20 percentage points lower than those of other firms. The evidence is consistent with the view that ownership structure plays an important role in determining the incentives of insiders to expropriate minority shareholders. *Michael Lemmon and Karl Lins are Associate and Assistant Professors of Finance, respectively, at the

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