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( — is a policy portal set up by the Centre for Economic Policy Research which aims to promote research-based policy analysis and commentary by leading scholars. Why do minority shareholders continue to hold stock despite the risk of expropriation by controlling shareholders? In this column, Sergey Chernenko, Assistant Professor at the Fisher College of Business at the Ohio State University, Fritz Foley, Associate Professor in the Finance area, Harvard Business School, and Robin Greenwood, Associate Professor at the Harvard Business School, provide two decades of evidence from Japan suggesting that many investors do not foresee these conflicts of interest, even when there is plenty of disclosure. Inefficient stock markets allow majority shareholders–often parent companies–to sell overpriced stock only to buy it back at a later date.

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