One Share - One Vote: The Theory
Swedish House of Finance; Stockholm School of Economics - Department of Finance; Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI); London School of Economics - Financial Markets (FMG) Group
New York University (NYU) - Leonard N. Stern School of Business; Stanford Institute for Economic Policy Research (SIEPR); European Corporate Governance Institute (ECGI)
Review of Finance, Vol. 12, Issue 1, pp. 1-49, 2008
The theoretical literature on security-voting structure can be organized around three questions: What impact do nonvoting shares have on takeover outcomes? How does disproportional voting power affect the incentives of blockholders? What are the repercussions of mandating one share - one vote for firms' financing and ownership choices? Overall, the costs and benefits of separating cash flow and votes reflect the fundamental governance trade off between disempowering blockholders and empowering managers. It is therefore an open question whether mandating one share - one vote would improve the quality of corporate governance, notably in systems that so far relied on active owners.
Date posted: July 14, 2008
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