No Derivative Shareholder Suits in Europe – A Model of Percentage Limits and Collusion

Kristoffel Grechenig () and Michael Sekyra
Additional contact information
Kristoffel Grechenig: Max Planck Institute for Research on Collective Goods, Bonn
Michael Sekyra: Vienna University of Technology, Austria

No 2010_15, Discussion Paper Series of the Max Planck Institute for Research on Collective Goods from Max Planck Institute for Research on Collective Goods

Abstract: We address one of the cardinal puzzles of European corporate law: the lack of derivate share-holder suits. We explain this phenomenon on the basis of percentage limits which require share-holders to hold a minimum amount of shares in order to bring a lawsuit. We show that, under this legal regime, managers will collude with large shareholders by means of settlements or bribes that impose a negative externality on small shareholders. Contrary to conventional agency models, we find that large shareholders do not monitor the management; as a consequence, there is no free riding opportunity for small shareholders.

Keywords: Collusion; Derivative Shareholder Suits; Percentage Limits; Monitoring; Free Riding (search for similar items in EconPapers)
JEL-codes: G30 K22 K42 (search for similar items in EconPapers)
Date: 2010-05
New Economics Papers: this item is included in nep-bec, nep-eur and nep-law
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.coll.mpg.de/pdf_dat/2010_15online.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:mpg:wpaper:2010_15

Access Statistics for this paper

More papers in Discussion Paper Series of the Max Planck Institute for Research on Collective Goods from Max Planck Institute for Research on Collective Goods Contact information at EDIRC.
Bibliographic data for series maintained by Marc Martin ().