42 Pages Posted: 8 Jun 2014 Last revised: 6 Aug 2014
Date Written: August 5, 2014
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: 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
By Mark Roe