Action-Based Contracts between Firms and Shareholders

Posted: 3 Oct 2017 Last revised: 6 Dec 2018

See all articles by Jordan Schoenfeld

Jordan Schoenfeld

Georgetown University, McDonough School of Business

Date Written: December 3, 2018


This study is one of the first to examine bilateral action-based contracts between firms and large shareholders. Using a comprehensive sample of 18,927 block investments from 1996 to 2015, I find that these contracts are increasingly prevalent: from 2010 to 2015, 13.7% of block investments involve contracts, whereas from 1996 to 1999, only 6.5% of block investments involve contracts. These contracts can specify provisions that pertain to financing terms, trading, directorships, payout policy, joint ventures, financial reporting, and selective disclosure, among other phenomena. The contract provisions are commonly stated in terms of accounting numbers, and the prevalence of these contracts is significantly positively associated with several proxies for shareholder-manager agency conflicts. These findings extend research on debt contracts and suggest that contracts between firms and shareholders have important but understudied consequences.

Keywords: Corporate Governance, Financial Contracting, Shareholder Contracts

JEL Classification: D21, G30, G32, G34, K22, L22

Suggested Citation

Schoenfeld, Jordan, Action-Based Contracts between Firms and Shareholders (December 3, 2018). Available at SSRN: or

Jordan Schoenfeld (Contact Author)

Georgetown University, McDonough School of Business ( email )

3700 O Street, NW
Washington, DC 20057
United States

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