Large shareholders, monitoring, and ownership dynamics: Toward pure managerial firms?

Amal Hili, Didier Laussel () and Ngo Long

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Abstract: We study ownership dynamics when the manager and the large shareholder, both risk neutral, simultaneously choose effort and monitoring level respectively to serve their non-congruent interests.We show that there is a wedge between the valuation of shares by atomistic shareholders and the large shareholder's valuation. At the Markov-perfect equilibrium, the large shareholder divests her shares. If the incongruence of their interests is mild, divestment is drastic: all her shares are sold immediately. If their interests diverge sharply, the divestment is gradual in order to prevent a sharp fall in share price. In the limit the firm becomes purely managerial.

Keywords: Managerial firms; Ownership dynamics (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (5)

Published in Journal of Economic Dynamics and Control, 2013, 37 (3), pp.666-679. ⟨10.1016/j.jedc.2012.10.006⟩

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Journal Article: Large shareholders, monitoring, and ownership dynamics: Toward pure managerial firms? (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-01499625

DOI: 10.1016/j.jedc.2012.10.006

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