Does the Composition of a Company's Shareholder Base Really Matter?

7 Pages Posted: 2 Aug 2014 Last revised: 7 Aug 2014

See all articles by Anne Beyer

Anne Beyer

Stanford University - Graduate School of Business

David F. Larcker

Stanford University - Graduate School of Business

Brian Tayan

Stanford University - Graduate School of Business

Date Written: July 31, 2014

Abstract

Most corporations dedicate significant time and attention to managing their shareholder base. Furthermore, companies overwhelmingly prefer “long-term shareholders” to “short-term shareholders.”

There is little rigorous research, however, that conclusively demonstrates the impact that individual investor groups have on corporate decision making, or that quantifies the premium (or discount) that specific shareholder groups add to corporate value.

We explore this topic in greater detail, and ask: Does the composition of a company’s shareholder base really matter? What substantive impact do shareholder — including activists — have on strategy, investment, and management? How long is long-term? How short is short-term? Can short-term market pressures be offset by long-term compensation incentives?

The Closer Look series is a collection of short case studies through which we explore topics, issues, and controversies in corporate governance and executive leadership. In each study, we take a targeted look at a specific issue that is relevant to the current debate on governance and explain why it is so important. Larcker and Tayan are co-authors of the books Corporate Governance Matters and A Real Look at Real World Corporate Governance.

Keywords: shareholder base, shareholder investment horizon, managing the shareholder base, shareholder influence, shareholder composition, corporate governance, long-term or short-term shareholders

JEL Classification: G3, J33, M52

Suggested Citation

Beyer, Anne and Larcker, David F. and Tayan, Brian, Does the Composition of a Company's Shareholder Base Really Matter? (July 31, 2014). Rock Center for Corporate Governance at Stanford University Closer Look Series: Topics, Issues and Controversies in Corporate Governance and Leadership No. CGRP-42. Available at SSRN: https://ssrn.com/abstract=2474792

Anne Beyer

Stanford University - Graduate School of Business ( email )

655 Knight Way
Stanford, CA 94305-5015
United States

David F. Larcker (Contact Author)

Stanford University - Graduate School of Business ( email )

Graduate School of Business
518 Memorial Way
Stanford, CA 94305-5015
United States
650-725-6159 (Phone)

Brian Tayan

Stanford University - Graduate School of Business ( email )

655 Knight Way
Stanford, CA 94305-5015
United States

Register to save articles to
your library

Register

Paper statistics

Downloads
508
Abstract Views
2,658
rank
53,569
PlumX Metrics