Trading and Shareholder Democracy
- 16 November 2020
- Online Spotlight Series
The third seminar in the ECGI Spotlight Series took place on 16 November 2020 at 16:00 CET (10:00 EST).
You can download the working paper here.
ABOUT THIS EVENT
The authors study shareholder voting in a model in which trading affects the composition of the shareholder base. Trading and voting are complementary, which gives rise to self-fulfilling expectations about proposal acceptance and multiple equilibria. Prices and shareholder welfare can move in opposite directions, so the former may be an invalid proxy for the latter. Increasing liquidity can reduce welfare, because it allows extreme shareholders to gain more weight in voting. Delegating decision-making to the board can improve shareholder value. However, the optimal board is biased, does not represent current shareholders, and may not garner support from the majority of shareholders.