Multiple Shareholders and Control Contests

34 Pages Posted: 3 Jun 2013

See all articles by Francis Bloch

Francis Bloch

National Center for Scientific Research (CNRS); University of Angers - Research Group in Quantitative Saving (GREQAM)

Ulrich Hege

Toulouse School of Economics; European Corporate Governance Institute (ECGI)

Date Written: September 29, 2003

Abstract

We consider the allocation of corporate control in a company with two large and a continuum of small shareholders. Control is determined in a shareholders' meeting, where the large shareholders submit competing proposals in order to attract the vote of small shareholders. The presence of multiple shareholders reduces private benefits through competition for control. In the optimal ownership structure, the more efficient blockholder will hold just enough shares to gain control, but a large fraction of shares is allocated to the less efficient shareholder in order to reduce rents. We investigate when the large shareholders would want to trade parts or all of their share blocks among them, and show that the concern about retrading will lead to a larger than optimal stake of the controlling shareholder.

Keywords: multiple shareholders, corporate control, contestability, block trading

JEL Classification: G32, G34

Suggested Citation

Bloch, Francis and Bloch, Francis and Hege, Ulrich, Multiple Shareholders and Control Contests (September 29, 2003). Available at SSRN: https://ssrn.com/abstract=2273211 or http://dx.doi.org/10.2139/ssrn.2273211

Francis Bloch

National Center for Scientific Research (CNRS) ( email )

54, boulevard Raspail
Paris, 75006
France

University of Angers - Research Group in Quantitative Saving (GREQAM) ( email )

Centre de la Vieille Charité
2, rue de la Charité
Marseille, 13002
France

Ulrich Hege (Contact Author)

Toulouse School of Economics ( email )

Place Anatole-France
Toulouse Cedex, F-31042
France
+33 5 61 12 86 01 (Phone)

HOME PAGE: http://https://www.tse-fr.eu/people/ulrich-hege

European Corporate Governance Institute (ECGI)

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

HOME PAGE: http:/www.ecgi.org

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