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How do large minority shareholders wield control?

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  • David A. Butz

Abstract

While high ownership concentrations in even the largest American corporations provide prima facie evidence that large minority shareholders wield control, the economics and finance literatures have mostly overlooked the question of how they do so. Using a simple framework adapted from work by Shleifer and Vishny (1986), this paper shows how minority shareholders can use takeover threats to discipline management. It then shows how they can bolster their threats, and hence their influence, simply by threatening to increase these minority stakes. When inside information is not too problematic, a relatively small stake can endow minority shareholders with considerable ongoing control.

Suggested Citation

  • David A. Butz, 1994. "How do large minority shareholders wield control?," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 15(4), pages 291-298, July/Augu.
    • Handle: RePEc:wly:mgtdec:v:15:y:1994:i:4:p:291-298
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    File URL: http://hdl.handle.net/10.1002/mde.4090150404
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    Cited by:

    1. Di Giannatale, Paolo & Passarelli, Francesco, 2018. "Integration contracts and asset complementarity: Theory and evidence from US data," International Journal of Industrial Organization, Elsevier, vol. 61(C), pages 192-222.
    2. Jenkinson, Tim & Ljungqvist, Alexander, 2001. "The role of hostile stakes in German corporate governance," Journal of Corporate Finance, Elsevier, vol. 7(4), pages 397-446, December.
    3. Rose, Morgan J., 2009. "Heterogeneous impacts of staggered boards by ownership concentration," Journal of Corporate Finance, Elsevier, vol. 15(1), pages 113-128, February.
    4. Yin-Hua Yeh & Pei-Gi Shu, 2014. "Change in Control and Firm Performance," Business and Economic Research, Macrothink Institute, vol. 4(2), pages 265-296, December.
    5. Huang, Jian & Jain, Bharat A. & Torna, Gökhan, 2018. "Anticipating loss from proxy contests," Journal of Business Research, Elsevier, vol. 83(C), pages 160-172.
    6. Peter J. Baldacchino & Amy Camilleri & Brandon Schembri & Simon Grima & Yannis E. Thalassinos, 2020. "Performance Evaluation of the Board of Directors in Listed Companies: A Small State Perspective," International Journal of Finance, Insurance and Risk Management, International Journal of Finance, Insurance and Risk Management, vol. 10(1), pages 99-119.

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