Modelling the Objective Function of Managers in the Presence of Overlapping Shareholding

37 Pages Posted: 3 Nov 2018 Last revised: 26 Mar 2021

See all articles by Duarte Brito

Duarte Brito

New University of Lisbon

Einer Elhauge

Harvard Law School

Ricardo M. Ribeiro

Universidade Católica Portuguesa, Católica Porto Business School

Helder Vasconcelos

Universidade do Porto - Faculdade de Economia (FEP)

Date Written: March 22, 2021

Abstract

The recent increase of overlapping shareholding has challenged the assumption of own-firm profit maximization. The managers of firms with overlapping shareholders, rather than maximizing own profit, may internalize the externalities their strategies impose on other firms. This internalization can decrease the incentives to compete and lessen market competition. We make use of a probabilistic voting model (in which shareholders vote to elect the manager) to examine the key assumptions necessary to microfound a formulation of the objective function of managers that satisfies six properties, which we identify as desirable to empirically examine the impact of overlapping ownership on market competition.

Keywords: Manager Objective Function, Overlapping Shareholding, Ownership Dispersion, Proportional Control, Banzhaf Control

JEL Classification: L13, L41

Suggested Citation

Brito, Duarte and Elhauge, Einer R. and Ribeiro, Ricardo and Vasconcelos, Helder, Modelling the Objective Function of Managers in the Presence of Overlapping Shareholding (March 22, 2021). Available at SSRN: https://ssrn.com/abstract=3264113 or http://dx.doi.org/10.2139/ssrn.3264113

Duarte Brito

New University of Lisbon ( email )

1099-085 Lisboa, 1099-085
Portugal

Einer R. Elhauge

Harvard Law School ( email )

1575 Massachusetts
Hauser 406
Cambridge, MA 02138
United States

Ricardo Ribeiro (Contact Author)

Universidade Católica Portuguesa, Católica Porto Business School ( email )

Rua Diogo Botelho, 1327
Porto, 4169-005
Portugal
+351-22619-6200 (Phone)
+351-22619-6291 (Fax)

HOME PAGE: http://ricardomribeiro.github.io/

Helder Vasconcelos

Universidade do Porto - Faculdade de Economia (FEP) ( email )

Rua Dr. Roberto Frias
s/n
4200-464 Porto, 4200-464
Portugal

HOME PAGE: http://www.fep.up.pt/docentes/hvasconcelos

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
125
Abstract Views
1,809
rank
279,086
PlumX Metrics