Institutional Investors as Blockholders

In P. M. Vasudev and S. Watson (Eds.), Corporate Governance after the Financial Crisis: 145-159, Cheltenham, UK; Northampton, MA, USA: Edward Elgar

15 Pages Posted: 7 Aug 2012  

Aviv Pichhadze

affiliation not provided to SSRN

Multiple version iconThere are 2 versions of this paper

Date Written: 2012

Abstract

Pichhadze (2010) introduced the Market Oriented Blockholder Model (MOBM) as properly describing the ownership pattern in the American equity markets. Under the model, the emerging blockholder in the American equity markets is the institutional investor (II). This poses a challenge to the shareholder primacy literature, which argues that IIs (i) have interests that coincide with the interests of the shareholder body in the public firm, (ii) promote dispersed ownership, and (iii) crusade shareholder interests domestically and internationally. I show that (i) the position of IIs as blockholders creates a paradox for both the literature and the law, (ii) IIs have interests that do not coincide with those of other shareholders, and (iii) failure to recognize these observation vis-à-vis IIs or the MOBM may result in the introduction of a systemic risk into the financial system.

Keywords: Corporate Governance, Ownership, Institutional Investors, Blockholders, Regulation, Capital Markets

JEL Classification: K22, G23, G32, G34, G38

Suggested Citation

Pichhadze, Aviv, Institutional Investors as Blockholders (2012). In P. M. Vasudev and S. Watson (Eds.), Corporate Governance after the Financial Crisis: 145-159, Cheltenham, UK; Northampton, MA, USA: Edward Elgar. Available at SSRN: https://ssrn.com/abstract=2125593

Aviv Pichhadze (Contact Author)

affiliation not provided to SSRN

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