Shareholder Decisionmaking in the Presence of Empty Voting and Hidden Ownership
Jordan M. Barry
University of San Diego School of Law
John William Hatfield
University of Texas at Austin
Scott Duke Kominers
August 5, 2014
San Diego Legal Studies Paper No. 14-161
We consider securities markets in which economic interests in firms and shareholder voting rights are traded independently; such markets allow for "empty voters" who hold voting rights in a firm that exceed their economic interests. We demonstrate that, in such settings, competitive equilibria generally do not exist and may be inefficient even when they do exist. As the competitive equilibrium solution concept does not provide useful predictions in the presence of empty voting, we focus on cooperative game-theoretic "core outcomes." We show that core outcomes always exist, are always efficient, and can be reached from any initial allocation through voluntary trading; moreover, at a core outcome, agents have efficient incentives with regards to information revelation.
Number of Pages in PDF File: 42
Keywords: Empty Voting, Hidden/Morphable Ownership, Corporate Governance, Shareholder Voting
JEL Classification: C71, G14, G18, G30, K22, L29
Date posted: June 8, 2014 ; Last revised: August 6, 2014
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