Shareholder-Manager Contracts in Public Companies
55 Pages Posted: 3 Oct 2017 Last revised: 17 Jan 2018
Date Written: January 9, 2018
I find that large shareholders and managers frequently write binding shareholder agreement contracts (SACs) that can have first-order effects on a variety of actions, including financing, trading, directorships, dividends, joint ventures, and private information sharing. From 1996 to 2015, 1,637 of the 18,927 large-percentage block investments in my sample involve SACs, and SACs are more prevalent in target firms with increased shareholder-manager agency conflicts. These findings imply that SACs address agency conflicts and that large shareholders can control managers through contracts that bypass conventional governance channels such as directorships.
Keywords: Corporate Governance, Financial Contracting, Shareholder Agreements
JEL Classification: D21, G30, G32, G34, K22, L22
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