Ownership structure, voting and risk
Dhillon, Amrita (2011) Ownership structure, voting and risk. Working Paper. Coventry: University of Warwick.
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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|
|Official Date:||16 September 2011|
|Number of Pages:||56|
|Status:||Not Peer Reviewed|
|Access rights to Published version:||Open Access|
Admati, A. R., P. Pfleiderer, and J. Zechner (1994): “Large Shareholder Activism, Risk Sharing,
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