Expropriation of minority shareholders in favor of majority shareholders: a descriptive analysis of the WAMU financial market

Abstract

The study analyzes the organizational ecosystem of companies listed on the UMOA’s regional financial market in order to identify the conditions that could favor expropriation practices of minority shareholders for the benefit of majority shareholders. The study focuses specifically on the ownership structure, governance and legal framework of companies listed on the BRVM. The analysis of the concentration of capital, the nature of the ownership structure, the size of the board of directors of companies and the legal framework of companies made it possible to highlight conditions that could favor expropriation practices of minority shareholders. The results obtained show that there are situations favorable to shareholder expropriation practices although the regulatory framework provides for the protection of minority shareholders. The ownership structure of companies, both in terms of concentration and the nature of shareholders, constitutes the primary source of risk from shareholder expropriation practices. Furthermore, certain companies which have a higher capital concentration indicator have a smaller board size. To some extent, the governance mechanisms appear to be favorable to controlling shareholders who represent foreign ownership. The study consisted of a simple description of organizational characteristics and the analysis of governance indicators without identifying a specific practice of shareholder expropriation. Future work could improve it by considering specific situations of shareholder expropriation practices in the environment of these companies. This study is intended to be a contribution to the understanding and improvement of the regulatory framework for listed companies, which has become an important issue for regulators.

Keywords: Ownership structure, capital concentration, minority shareholders, expropriation, tunneling  

JEL Classification: G32

Paper type: Empirical research