Contracts Between Firms and Shareholders
Journal of Accounting Research, Forthcoming
56 Pages Posted: 3 Oct 2017 Last revised: 20 Mar 2020
Date Written: January 10, 2020
Theory predicts the existence of explicit bilateral contracts between firms and expert shareholders. I assemble and analyze a large-scale data set of these contracts. Using block investments from 1996 to 2018, I find that these contracts involve mainly corporate owners and activist owners, and often specify covenants pertaining to financing, trading, directorships, dividends, joint ventures, corporate investment, financial reporting, and information access. I also find that some of the contract covenants are stated in terms of accounting information, and that the prevalence of these contracts is significantly positively associated with measures of information asymmetry between managers and shareholders. Overall, this study provides some of the first systematic evidence on explicit bilateral contracts between firms and shareholders.
Keywords: Agency Problems; Corporate Governance; Shareholder Contracts
JEL Classification: G32, G34, K22, L22
Suggested Citation: Suggested Citation