Mike Burkart, Samuel Lee Signalling to Dispersed Shareholders and Corporate Control (01 Jul 2014) Available at ECGI: https://ecgi.global/working-paper/signalling-dispersed-shareholders-and-corporate-control
This paper analyses how outsiders, such as bidders or activist investors, overcome the lack of coordination and information among dispersed shareholders. We identify the two basic means to achieve this goal. First, the outsider must relinquish private benefits in a manner that is informative about security benefits.
We show under which conditions this is feasible and which acquisition strategies used in practice meet these conditions. Second, the outsider can alternatively use derivatives to drive a wedge between her voting power and her economic interest in the firm. Such separation of ownership and control, while typically considered a source of corporate governance problems, is an efficient response to the frictions dispersed ownership causes for control contestability.
We derive a measure that captures the extent to which overlapping ownership structures shift managers’ incentives to internalize externalities. A key feature of the measure is that it allows for the possibility that not all investors are...Read more
Although controlling shareholder agency problems have been well studied so far, many questions still remain unanswered. In particular, an important puzzle in “bad-law” jurisdictions is: why some controlling shareholders (“roving controllers”)...Read more
This paper is the introductory chapter of Luca Enriques and Tobias Tröger (eds.), The Law and Finance of Related Party Transactions (Cambridge University Press: forthcoming). Its goal is to sketch out the individual chapters’ contributions to the...Read more
Hedge fund activism is associated with improvements in the governance and performance of targeted firms. In this paper, we show that the positive effects of activism reach beyond the targets, as yet-to-be-targeted peers make similar improvements...Read more