Shareholder Decisionmaking in the Presence of Empty Voting and Hidden Ownership

42 Pages Posted: 8 Jun 2014 Last revised: 6 Aug 2014

Jordan M. Barry

University of San Diego School of Law

John William Hatfield

University of Texas at Austin

Scott Duke Kominers

Harvard University

Date Written: August 5, 2014

Abstract

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.

Keywords: Empty Voting, Hidden/Morphable Ownership, Corporate Governance, Shareholder Voting

JEL Classification: C71, G14, G18, G30, K22, L29

Suggested Citation

Barry, Jordan M. and Hatfield, John William and Kominers, Scott Duke, Shareholder Decisionmaking in the Presence of Empty Voting and Hidden Ownership (August 5, 2014). San Diego Legal Studies Paper No. 14-161. Available at SSRN: https://ssrn.com/abstract=2447097 or http://dx.doi.org/10.2139/ssrn.2447097

Jordan Barry

University of San Diego School of Law ( email )

5998 Alcala Park
San Diego, CA 92110-2492
United States

John William Hatfield

University of Texas at Austin ( email )

Austin, TX 78712
United States

Scott Duke Kominers (Contact Author)

Harvard University ( email )

Rock Center, Harvard Business School
Soldiers Field
Boston, MA 02163
United States

HOME PAGE: http://www.scottkom.com/

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