DP11933 Blockholder Voting
|Author(s):||Heski Bar-Isaac, Joel Shapiro|
|Publication Date:||March 2017|
|Keyword(s):||Blockholder, corporate governance, shareholder voting|
|Programme Areas:||Financial Economics|
|Link to this Page:||cepr.org/active/publications/discussion_papers/dp.php?dpno=11933|
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.