The Macroeconomics of Shareholder Pressure

40 Pages Posted: 22 Aug 2003

See all articles by David Thesmar

David Thesmar

Massachusetts Institute of Technology (MIT) - Economics, Finance, Accounting (EFA)

Date Written: May 2003


This Paper argues that shareholder activism can be considered as similar to the adoption of increasing returns-to-scale technology by financial institutions. I start from this mechanism to build a model designed to assess the long-run consequences of shareholder pressure. I then use this model to analyse the interaction between shareholder pressure, savings dynamics and growth. The main consequence is that the economy exhibits multiple steady state equilibria. Two important implications are derived: first, temporary population changes have long lasting effects. Second, small technology improvements may lead to large changes in welfare. I then feed the model with an additional assumption: managers are employment friendly. This allows us to study the relation between corporate control, growth and the demand for skill. It also allows us to address concerns raised by the proponents of the stakeholder society in a formal framework. Finally, I provide some empirical evidence that shareholder pressure actually has a macroeconomic impact on growth and labour demand, in line with some of the model predictions.

Keywords: Corporate governance, capital assumption, demography, inequality

JEL Classification: G23, G34, O40

Suggested Citation

Thesmar, David, The Macroeconomics of Shareholder Pressure (May 2003). CEPR Discussion Paper No. 3956. Available at SSRN:

David Thesmar (Contact Author)

Massachusetts Institute of Technology (MIT) - Economics, Finance, Accounting (EFA) ( email )

77 Massachusetts Avenue
Cambridge, MA 02139-4307
United States
16172259767 (Phone)

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