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Blockholder Voting

Heski Bar-Isaac () and Joel Shapiro

No 11933, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: By introducing a shareholder with many votes (a blockholder) to a standard model of voting, we uncover several striking results. First, if a blockholder is unbiased, she may not vote with all of her shares. This is efficient, as it prevents her vote from drowning out the information provided by other votes. Second, if this blockholder can announce her vote before the vote takes place, other shareholders may ignore their information and vote with the blockholder to support her superior information. Third, if the blockholder is biased, some shareholders will try to counter the blockholder's vote. The results are robust to allowing for information acquisition and trade. This suggests that regulations discouraging or prohibiting abstention, strategic behavior, and/or coordination may reduce efficiency.

Keywords: Blockholder; corporate governance; shareholder voting (search for similar items in EconPapers)
JEL-codes: D72 G34 (search for similar items in EconPapers)
Date: 2017-03
New Economics Papers: this item is included in nep-cdm, nep-mic and nep-pol
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Journal Article: Blockholder voting (2020) Downloads
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