Are All Private Benefits of Control Ineffective? Principal–Principal Benefits, External Governance Quality, and Firm Performance

Research output: Contribution to journalArticleScientificpeer-review


Research units

  • Erasmus University Rotterdam
  • University of Illinois at Chicago
  • University of South Carolina


Private benefits of control (PBC) are benefits that controlling shareholders consume, but that are not shared with minority shareholders. Research focusing on the value protection role of corporate governance typically frames PBC as principal-principal (PP) agency costs, and interprets them as a form of minority shareholder expropriation that decreases firm performance. Taking a value creation perspective of corporate governance, however, we propose a more nuanced role for PBC. Specifically, we see them also as principal-principal (PP) agency benefits that compensate controlling shareholders for their monitoring and advisory services, which can increase firm performance. Since both PP costs and benefits affect firm performance, we theorize that PBC enhance firm performance at a diminishing rate. Furthermore, we show that the effect of PBC on firm performance is more positive when country-level external governance mechanisms are strong


Original languageEnglish
Pages (from-to)725-757
JournalJournal of Management Studies
Issue number4
Early online date2018
Publication statusPublished - 2019
MoE publication typeA1 Journal article-refereed

    Research areas

  • private benefits of control, controlling shareholders, control transactions, institutions, comparative corporate governance, firm performance

ID: 30375571