Ownership Structure, Voting and Risk

Review of Financial Studies, Forthcoming

Posted: 18 Mar 2009 Last revised: 20 Oct 2014

See all articles by Amrita Dhillon

Amrita Dhillon

University of Warwick - Department of Economics

Silvia Rossetto

University of Toulouse 1 - Toulouse School of Economics (TSE)

Date Written: September 30, 2014

Abstract

We analyze the determinants of a firm's ownership structure when decisions over risk are taken by majority vote of risk-averse shareholders. We show that when a fraction of small, diversified shareholders abstains from voting, mid-sized blockholders may emerge to mitigate the conflict of interests between one large shareholder, who prefers less risky investments, and these small, non-voting shareholders. The paper offers a novel explanation for the puzzling observation that many firms have multiple blockholders. The paper develops numerous empirical implications, for example on the link between ownership structure and risk choices and on the relative size of blocks.

Keywords: Corporate governance, ownership structure, risk, contracts, majority voting, one share one vote, blockholders.

JEL Classification: G34, G32, G24, D72

Suggested Citation

Dhillon, Amrita and Rossetto, Silvia, Ownership Structure, Voting and Risk (September 30, 2014). Review of Financial Studies, Forthcoming. Available at SSRN: https://ssrn.com/abstract=1363771 or http://dx.doi.org/10.2139/ssrn.1363771

Amrita Dhillon

University of Warwick - Department of Economics ( email )

Coventry CV4 7AL
United Kingdom
+44 1 20 352 3032 (Phone)

Silvia Rossetto (Contact Author)

University of Toulouse 1 - Toulouse School of Economics (TSE) ( email )

Place Anatole-France
Toulouse Cedex, F-31042
France

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