Is one share/one vote optimal?†

Denis Gromb and Viral Acharya

Review of Finance, 2025, vol. 29, issue 3, 635-660

Abstract: In a tender offer by a value-increasing raider, voting shareholders face a free-rider problem. However, when they are not atomistic, they do not completely free-ride. In contrast, non-voting shareholders, who are never pivotal for the success of the offer, are absolute free-riders. Hence, in this case there is a gain from departing from one share/one vote. This departure also has a cost; there is an increased vulnerability to value-decreasing raiders, and the optimal governance structure balances the cost and the gain.

Keywords: corporate governance; corporate control; raiders; free-riding problem; voting shareholders; non-voting shareholders (search for similar items in EconPapers)
JEL-codes: G3 (search for similar items in EconPapers)
Date: 2025
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