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Corporate Control and the Stock Market

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Author Info
Stefano Demichelis
Klaus Ritzberger

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Abstract

This paper studies a general equilibrium model with an investor controlled firm. Shareholders can vote on the firm’s production plan in an assembly. Prior to that they may trade shares on the stock market. Since stock market trades determine the distribution of votes, trading is strategic. There is always an equilibrium, where share trades lead to owners deciding for competitive behavior, but there may also be equilibria, where monoplistic behavior prevails.

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Publisher Info
Paper provided by Collegio Carlo Alberto in its series Carlo Alberto Notebooks with number 60.

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Length: 35 pages
Date of creation: 2007
Date of revision:
Handle: RePEc:cca:wpaper:60

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Related research
Keywords: Corporate governance; general equilibrium; objective function of the firm; shareholder voting; stock markets.;

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Find related papers by JEL classification:
D21 - Microeconomics - - Production and Organizations - - - Firm Behavior
D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
D51 - Microeconomics - - General Equilibrium and Disequilibrium - - - Exchange and Production Economies
G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Capital and Ownership Structure
G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Camelia Bejan, 2008. "The objective of a privately owned firm under imperfect competition," Economic Theory, Springer, vol. 37(1), pages 99-118, October. [Downloadable!] (restricted)
  2. Erkan YalÁin & Thomas I. Renstr–m, 2003. "Endogenous Firm Objectives," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 5(1), pages 67-94, 01. [Downloadable!] (restricted)
  3. Hirshleifer, David & Titman, Sheridan, 1990. "Share Tendering Strategies and the Success of Hostile Takeover Bids," Journal of Political Economy, University of Chicago Press, vol. 98(2), pages 295-324, April. [Downloadable!] (restricted)
  4. Roberts, Kevin W. S., 1977. "Voting over income tax schedules," Journal of Public Economics, Elsevier, vol. 8(3), pages 329-340, December. [Downloadable!] (restricted)
  5. Frank Milne & David Kelsey, 2006. "Imperfect Competition and Corporate Governance," Working Papers 1079, Queen's University, Department of Economics. [Downloadable!]
    Other versions:
  6. Dierker, Egbert & Grodal, Birgit, 1996. "Profit Maximization Mitigates Competition," Economic Theory, Springer, vol. 7(1), pages 139-60, January.
  7. Grossman, Sanford J. & Hart, Oliver D., 1988. "One share-one vote and the market for corporate control," Journal of Financial Economics, Elsevier, vol. 20(1-2), pages 175-202, January. [Downloadable!] (restricted)
  8. Sanford J. Grossman & Oliver D. Hart, 1980. "Takeover Bids, the Free-Rider Problem, and the Theory of the Corporation," Bell Journal of Economics, The RAND Corporation, vol. 11(1), pages 42-64, Spring. [Downloadable!] (restricted)
  9. Franco Modigliani & Enrico Perotti, 1997. "Protection of minority interest and the development of security markets," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 18(7-8), pages 519-528.
  10. Mike Burkart & Denis Gromb & Fausto Panunzi, 1998. "Why Higher Takeover Premia Protect Minority Shareholders," Journal of Political Economy, University of Chicago Press, vol. 106(1), pages 172-204, February. [Downloadable!] (restricted)
  11. DeMarzo, Peter M, 1993. "Majority Voting and Corporate Control: The Rule of the Dominant Shareholder," Review of Economic Studies, Blackwell Publishing, vol. 60(3), pages 713-34, July. [Downloadable!] (restricted)
  12. Rydqvist, Kristian, 1996. "Takeover bids and the relative prices of shares that differ in their voting rights," Journal of Banking & Finance, Elsevier, vol. 20(8), pages 1407-1425, September. [Downloadable!] (restricted)
  13. Ernst Maug & Bilge Yilmaz, 2002. "Two-Class Voting: A Mechanism for Conflict Resolution," American Economic Review, American Economic Association, vol. 92(5), pages 1448-1471, December. [Downloadable!]
  14. Holmstrom, Bengt & Tirole, Jean, 1997. "Financial Intermediation, Loanable Funds, and the Real Sector," The Quarterly Journal of Economics, MIT Press, vol. 112(3), pages 663-91, August.
    Other versions:
  15. Zingales, Luigi, 1994. "The Value of the Voting Right: A Study of the Milan Stock Exchange Experience," Review of Financial Studies, Oxford University Press for Society for Financial Studies, vol. 7(1), pages 125-48. [Downloadable!] (restricted)
  16. Mark Bagnoli, Barton L. Lipman, 1988. "Successful Takeovers without Exclusion," Review of Financial Studies, Oxford University Press for Society for Financial Studies, vol. 1(1), pages 89-110. [Downloadable!] (restricted)
  17. Holger M. Müller & Fausto Panunzi, 2004. "Tender Offers and Leverage," The Quarterly Journal of Economics, MIT Press, vol. 119(4), pages 1217-1248, November. [Downloadable!] (restricted)
  18. Ernst Maug & Bilge Yilmaz, 2002. "Two-Class Voting: A Mechanism for Conflict Resolution?," NajEcon Working Paper Reviews 391749000000000536, www.najecon.org. [Downloadable!]
  19. Bejan, Camelia, 2008. "Production and financial decisions under uncertainty," MPRA Paper 11033, University Library of Munich, Germany. [Downloadable!]
  20. Jaskold Gabszewicz, Jean & Vial, Jean-Philippe, 1972. "Oligopoly "A la cournot" in a general equilibrium analysis," Journal of Economic Theory, Elsevier, vol. 4(3), pages 381-400, June. [Downloadable!] (restricted)
  21. Ritzberger, Klaus, 2005. "Shareholder voting," Economics Letters, Elsevier, vol. 86(1), pages 69-72, January. [Downloadable!] (restricted)
  22. Harris, Milton & Raviv, Artur, 1988. "Corporate governance : Voting rights and majority rules," Journal of Financial Economics, Elsevier, vol. 20(1-2), pages 203-235, January. [Downloadable!] (restricted)
  23. Victor Dorofeenko & Larry Lang & Klaus Ritzberger & Jamsheed Shorish, 2008. "Who controls Allianz?," Annals of Finance, Springer, vol. 4(1), pages 75-103, January. [Downloadable!] (restricted)
Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Simone Cerreia-Vioglio & Fabio Maccheroni & Massimo Marinacci & Luigi Montrucchio, 2008. "Complete Monotone Quasiconcave Duality," Carlo Alberto Notebooks 80, Collegio Carlo Alberto. [Downloadable!]
  2. Esteban Jaimovich, 2008. "Adverse Selection and Entrepreneurship in a Model of Development," Carlo Alberto Notebooks 78, Collegio Carlo Alberto. [Downloadable!]
  3. Daron Acemoglu & Davide Ticchi & Andrea Vindigni, 2008. "A Theory of Military Dictatorships," Carlo Alberto Notebooks 74, Collegio Carlo Alberto. [Downloadable!]
    Other versions:
  4. Frank Milne & David Kelsey, 2006. "Takeovers and Cooperatives," Working Papers 1113, Queen's University, Department of Economics. [Downloadable!]
  5. Ales Cerný & Fabio Maccheroni & Massimo Marinacci & Aldo Rustichini, 2008. "On the Computation of Optimal Monotone Mean-Variance Portfolios via Truncated Quadratic Utility," Carlo Alberto Notebooks 79, Collegio Carlo Alberto. [Downloadable!]
  6. Russell Gerrard & Bjarne Højgaard & Elena Vigna, 2008. "Choosing the Optimal Annuitization Time Post Retirement," Carlo Alberto Notebooks 76, Collegio Carlo Alberto. [Downloadable!]
  7. Itzhak Gilboa & Fabio Maccheroni & Massimo Marinacci & David Schmeidler, 2008. "Objective and Subjective Rationality in a Multiple Prior Model," Carlo Alberto Notebooks 73, Collegio Carlo Alberto, revised 2008. [Downloadable!]
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