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Working Paper No. 1419

The Impact of Founders on Information Asymmetry vis-à-vis Outside Investors: Evidence from Caribbean Offshore Tax Havens

Working Paper
Referens
Hearn, Bruce, Lars Oxelheim och Trond Randøy (2021). ”The Impact of Founders on Information Asymmetry vis-à-vis Outside Investors: Evidence from Caribbean Offshore Tax Havens”. IFN Working Paper nr 1419. Stockholm: Institutet för Näringslivsforskning.

Författare
Bruce Hearn, Lars Oxelheim, Trond Randøy

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.

Lars Oxelheim

+46 (0)8 665 4527
+46 (0)70 861 9361
lars.oxelheim@ifn.se