Although controlling shareholder agency problems have been well studied so far, many questions still remain unanswered. In particular, an important puzzle in a bad-law jurisdiction is: why some controlling shareholders (“roving controllers”) loot the entire corporate assets at once, and why others (“stationary controllers”) siphon a part of corporate assets on a continuous basis. To solve this conundrum, this Article provides analytical frameworks exploring the behaviors and motivations of controlling shareholders. To begin with, I reinterpret Olson’s political theory of “banditry” in the context of corporate governance in developing countries. Based on a new taxonomy of controlling shareholders (“roving controllers” and “stationary controllers”), I examine under what circumstances a controlling shareholder chooses to be roving or stationary, and why economically rational controlling shareholders with a long time horizon voluntarily abstain from looting minority shareholders. In addition, agreeing with weaknesses of family corporations, I explain that controlling “family” shareholders tend to be more stationary, and thus improve the quality of corporate governance. Moreover, I explain that a controlling shareholder’s non-pecuniary benefits (i.e., psychic value of corporate insiders when running business) can potentially lower the level of expropriation from public shareholders.
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