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.
This paper studies how managers react to shareholder empowerment vis-à-vis governance provisions. We show that a staggered legislative change that increases noncompliance costs in the implementation of shareholder-initiated majority voting...Read more
Shareholder activism by hedge funds has taken hold in Germany in spite of large ownership concentration. This essay uses the example of Stada Arzneimittel AG to highlight features of activism, German style. It goes on to discuss the legal issues...Read more
Index funds and indexed ETFs managed by the “Big Three” – BlackRock, Vanguard and State Street – have grown to be the largest investors in the capital markets and have become the presumptive “deciders” of corporate law controversies. With this...Read more
This paper analyzes the conduct of mutual funds in shareholder litigation. We begin by reviewing the basic forms of shareholder litigation and the benefits such claims might offer mutual fund investors. We then investigate, though an in-...Read more