Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/262034 
Year of Publication: 
2021
Series/Report no.: 
IFN Working Paper No. 1420
Publisher: 
Research Institute of Industrial Economics (IFN), Stockholm
Abstract: 
Ceding ownership to outside investors provides a control dilemma for founders. In less developed capital markets with weaker formal institutions, we argue that retained founder director ownership can lower the transaction costs of external capital. Our argument rests on incomplete contracting and institutional theory, particularly highlighting the elevated status of the founding entrepreneur. Based on a longitudinal study of 179 listed Caribbean firms, we find that retained founder ownership reduces information asymmetry vis-à-vis outside minority investors. The reduced information asymmetry is even stronger for firms with a related party/subsidiary within a tax haven, and for firms with strong shareholder rights.
Subjects: 
COVID-19
business cycle
human capital investment
field of study
JEL: 
I20
J24
Document Type: 
Working Paper

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