1986/06/01 by Andrei Shleifer, Robert W. Vishny · 25 citations
Business, Management and Accounting · Economics, Econometrics and Finance · #Corporate Finance and Governance #Corporate Taxation and Avoidance #Economic Policies and Impacts
paper · doi:10.1086/261385
In a corporation with many small owners, it may not pay any one of them to monitor the performance of the management. We explore a model in which the presence of a large minority shareholder provides a partial solution to this free-rider problem. The model sheds light on the following questions: Under what circumstances will we observe a tender offer as opposed to a proxy fight or an internal management shake-up? How strong are the forces pushing toward increasing concentration of ownership of a diffusely held firm? Why do corporate and personal investors commonly hold stock in the same firm, despite their disparate tax preferences?