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Can Borrowing Shares Vindicate Shareholder Primacy?

Onnig H. Dombalagian

Tulane Law School

October 26, 2008

UC Davis Law Review, Forthcoming
Tulane Public Law Research Paper No. 08-10

The recent use of borrowed votes to influence the outcome of proxy contests and takeovers has raised considerable alarm in the academic and financial press. In particular, commentators express concern about the consequences of freely decoupling the economic interests and voting power of shares trading in anonymous markets. I argue that a transparent public share borrowing market, if made available to institutional shareholders committed to long-term wealth maximization, could allay many such concerns. Moreover, such a market could empower institutional shareholders to take steps to improve corporate governance without the need to expand shareholder rights. I consider in turn the impact of facilitating share borrowing on the debate between managerial and shareholder primacy, on social welfare in various vote-buying transactions, and on existing securities loan markets.

Number of Pages in PDF File: 73

Keywords: Empty voting, securities lending, shareholder primacy

JEL Classification: K22

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Date posted: October 28, 2008  

Suggested Citation

Dombalagian, Onnig H., Can Borrowing Shares Vindicate Shareholder Primacy? (October 26, 2008). UC Davis Law Review, Forthcoming; Tulane Public Law Research Paper No. 08-10. Available at SSRN: https://ssrn.com/abstract=1290034

Contact Information

Onnig Hatchig Dombalagian (Contact Author)
Tulane Law School ( email )
6329 Freret Street
New Orleans, LA 70118
United States
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