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Blockholder Voting

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  • Bar-Isaac, Heski
  • Shapiro, Joel

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.

Suggested Citation

  • Bar-Isaac, Heski & Shapiro, Joel, 2017. "Blockholder Voting," CEPR Discussion Papers 11933, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:11933
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    More about this item

    Keywords

    Blockholder; Shareholder voting; Corporate governance;
    All these keywords.

    JEL classification:

    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior

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