140 research outputs found
A survey of blockholders and corporate control
The author surveys the empirical literature on large-percentage shareholders in public corporations, focusing on four key issues: the prevalence of blockholders; the motivation for block ownership; the effect of blockholders on executive compensation, leverage, the incidence of takeovers, and a wide range of corporate decisions; and the effect of blockholders on firm value. A central finding of this study is that there is little reason for policymakers or small investors to fear large-percentage shareholders in general, especially when the blockholders are active in firm management.Stockholders ; Corporate governance
Constraints on Large-Block Shareholders
Corporate managers who own a majority of the common stock in their company or who represent another firm owning such an interest appear to be less constrained than managers of diffusely held firms, yet their power to harm minority shareholders must be circumscribed by some organizational or legal arrangements. Empirical investigations reveal that boards of directors in majority-owned firms are little different from firms with diffuse stock ownership. Another source of constraints on a majority shareholders -- capital market activity -- also appears to be no different from firms with diffuse ownership. Finally, there is little evidence that new organizational mechanisms have evolved to constrain managers who own large blocks of stock. The frequency and associated wealth effects of reorganizations of majority shareholder firms, however, indicate that the law constrains managerial majority shareholders, both in their day-to-day management and when they redeem the ownership interest of minority shareholders.
Ownership Concentration and Corporate Performance on the Budapest Stock Exchange: Do too Many Cooks Spoil the Goulash?
Norwegian School of Economics and Business Administration, Shifting Capital Markets and Performance conference at Yale University, Texas Finance Festival
Abstract Since World War II, direct stock ownership by households has largely been replaced by indirect stock ownership by financial institutions which manage pensions. We argue that tax policy is the driving force. Using long time-series from eight countries, we show that the fraction of household ownership decreases with measures of the tax benefits of holding stocks inside a pension plan. This finding is important for policy considerations on effective taxation and for financial economics research on the long-term effects of taxation on corporate finance and asset prices
Institutional investors and corporate governance
We provide a comprehensive overview of the role of institutional investors in corporate governance with three main components. First, we establish new stylized facts documenting the evolution and importance of institutional ownership. Second, we provide a detailed characterization of key aspects of the legal and regulatory setting within which institutional investors govern portfolio firms. Third, we synthesize the evolving response of the recent theoretical and empirical academic literature in finance to the emergence of institutional investors in corporate governance. We highlight how the defining aspect of institutional investors – the fact that they are financial intermediaries – differentiates them in their governance role from standard principal blockholders. Further, not all institutional investors are identical, and we pay close attention to heterogeneity amongst institutional investors as blockholders
Does Shareholder Proxy Access Improve Firm Value? Evidence from the Business Roundtable Challenge
Managerial Power, Stock-Based Compensation, and Firm Performance: Theory and Evidence
We study theoretically and empirically the relation among CEO power, CEO pay and
firm performance. Our theoretical model follows the rent extraction view of CEO compensation
put forward by the managerial power theory. We test our theoretical findings
using the sample of S&P1500 firms. The predicted relation between power and pay is
largely supported. However, the relation between power and firm performance has mixed
support, suggesting that, while the managerial power theory has relevance in explaining
the relation between power and pay, the scope of power needs to be broadened for better
understanding of how managerial power affects firm performance
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