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Stockholder Unanimity in Making Production and Financial Decisions


Sanford J. Grossman


University of Pennsylvania - Finance Department; National Bureau of Economic Research (NBER)

Joseph E. Stiglitz


Columbia Business School - Finance and Economics; National Bureau of Economic Research (NBER)

December 1980

NBER Working Paper No. R0122

Abstract:     
We show that "spanning" does not imply stockholder unanimity if there is trading in the shares of firms. Each basis vector of the space spanned by all firms' output vectors can be treated like a composite commodity. If, in addition to spanning, firms act as price takers with respect to prices of composite commodities, then there is unanimity. We analyze the spanning assumption for the vector space of contingent claims generated by firms' choices of debt-equity ratios. We show that there is a strong relationship between the Modigliani-Miller theorem, spanning, and the existence of a complete set of markets.

Number of Pages in PDF File: 24

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Date posted: July 4, 2004  

Suggested Citation

Grossman, Sanford J. and Stiglitz, Joseph E., Stockholder Unanimity in Making Production and Financial Decisions (December 1980). NBER Working Paper No. R0122. Available at SSRN: http://ssrn.com/abstract=228053

Contact Information

Sanford J. Grossman (Contact Author)
University of Pennsylvania - Finance Department ( email )
The Wharton School
3620 Locust Walk
Philadelphia, PA 19104
United States

National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Joseph E. Stiglitz
Columbia Business School - Finance and Economics ( email )
3022 Broadway
814 Uris Hall
New York, NY 10027
United States
(212) 854-0671 (Phone)
(212) 662-8474 (Fax)
HOME PAGE: http://www.josephstiglitz.com
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
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