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Separation of voting rights from cash-flow rights in corporate law : in search of the optima
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Ranade, Siddharth Mohan (2013) Separation of voting rights from cash-flow rights in corporate law : in search of the optima. Working Paper. Coventry: University of Warwick. Warwick School of Law Research Paper (Number 2013/07).
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Official URL: http://ssrn.com/abstract=2246757
Abstract
This article studies the effect of separating the voting rights attached to a share from its cash-flow rights. Such separation can be achieved through various techniques such as Dual Stock Equity, Pyramids, Irrevocable Proxies and more recently through derivatives market and securities lending platform. The techniques are a means of enjoying voting rights disproportionate to the economic exposure of the investor. Such disproportionality has an impact on the monitoring mechanism that is embedded in the institution of voting rights. The monitoring mechanism has twin facets. One is voting influence exercised by the shareholders in company meetings and second is the monitoring through the market for corporate control. The analysis proceeds by first identifying the criterion for such analysis in the essential elements of the monitoring mechanism. On applying such criterion, it is found that such impact can be positive and also negative. For the purpose of such analysis, the techniques are sub-divided into 4 categories depending on the economic exposure voting rights wedge they create. The impact is positive when it strengthens the monitoring mechanism. The impact is negative when the monitoring mechanism is diluted by such technique. Where, such technique results into a transfer of voting rights from voters who do not have appropriate incentive to vote to those who have such incentives, then such a technique should be encouraged by law. Where the impact is negative, it should be proscribed through mandatory law as opposed to vanilla disclosure regulation.
Item Type: | Working or Discussion Paper (Working Paper) | ||||
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Divisions: | Faculty of Social Sciences > School of Law | ||||
Series Name: | Warwick School of Law Research Paper | ||||
Publisher: | University of Warwick | ||||
Place of Publication: | Coventry | ||||
Official Date: | 8 April 2013 | ||||
Dates: |
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Number: | Number 2013/07 | ||||
Number of Pages: | 45 | ||||
Status: | Not Peer Reviewed | ||||
Publication Status: | Published | ||||
Access rights to Published version: | Open Access (Creative Commons) | ||||
Open Access Version: |
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