Dhillon, Amrita (2011) Ownership structure, voting and risk. Working Paper. Coventry: University of Warwick..

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Abstract

We analyze the determinants of ownership structure in firms when conflicts of interest on risk arise endogenously via different ownership stakes and firm decisions are made through majority voting. A large block is chosen to incentivize monitoring. Because a large blockholder holds a large share of the firm, he is averse to risky investing. This generates a conflict of interest with dispersed shareholders. Mid-size blockholders, voting in favor of middle of the road projects, mitigate the conflict of interest. Depending on monitoring costs, voting institutions and the nature of the industry, three types of ownership structures arise: one large shareholder with a fringe of dispersed owners, multiple large shareholders and fully dispersed shareholders.

Item Type:	Working or Discussion Paper (Working Paper)
Subjects:	H Social Sciences > HB Economic Theory H Social Sciences > HF Commerce
Divisions:	Faculty of Social Sciences > Economics
Library of Congress Subject Headings (LCSH):	Stockholders -- Econometric models, Voting -- Econometric models, Financial risk -- Econometric models
Publisher:	University of Warwick
Place of Publication:	Coventry
Date:	16 September 2011
Number of Pages:	56
Status:	Not Peer Reviewed
Publication Status:	Published
Access rights to Published version:	Open Access
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URI:	http://wrap.warwick.ac.uk/id/eprint/51385

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