Activists, raiders, and directors: opportunism and the balance of corporate power
We model corporate governance in a world with competitive securities markets as well as markets for corporate assets. We show that varying the liquidity and opacity of corporate assets, the vitality of the market for corporate control, and the costs of enforcing shareholder rights to cash flows lea...
| Main Authors: | , , |
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| Format: | Working paper |
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University of Oxford
2008
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| _version_ | 1797084198454951936 |
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| author | Noe, T Rebello, M Sonti, R |
| author_facet | Noe, T Rebello, M Sonti, R |
| author_sort | Noe, T |
| collection | OXFORD |
| description | We model corporate governance in a world with competitive securities markets as well as markets for corporate assets. We show that varying the liquidity and opacity of corporate assets, the vitality of the market for corporate control, and the costs of enforcing shareholder rights to cash flows leads to a plethora of institutional designs. When asset liquidity is high, shareholder rights are enforced through the option to liquidate as in a mutual fund. When the opacity of corporate assets is relatively high and asset liquidity is relatively low, firms will eschew reliance on board monitoring and instead rely on shareholder activism. An increase in the cost of ownership concentration, by increasing the inefficiency of shareholder activism, will increase the reliance on board activism and decrease the reliance on CEO compensation. Decreases in the cost of enforcement of shareholder rights and the opacity of corporate assets, and increased raider activity further strengthen the preference for activist boards. |
| first_indexed | 2024-03-07T01:52:02Z |
| format | Working paper |
| id | oxford-uuid:9a70a93b-2eff-4877-af80-20a37b52fcd3 |
| institution | University of Oxford |
| last_indexed | 2024-03-07T01:52:02Z |
| publishDate | 2008 |
| publisher | University of Oxford |
| record_format | dspace |
| spelling | oxford-uuid:9a70a93b-2eff-4877-af80-20a37b52fcd32022-03-27T00:21:20ZActivists, raiders, and directors: opportunism and the balance of corporate powerWorking paperhttp://purl.org/coar/resource_type/c_8042uuid:9a70a93b-2eff-4877-af80-20a37b52fcd3Symplectic ElementsBulk import via SwordUniversity of Oxford2008Noe, TRebello, MSonti, RWe model corporate governance in a world with competitive securities markets as well as markets for corporate assets. We show that varying the liquidity and opacity of corporate assets, the vitality of the market for corporate control, and the costs of enforcing shareholder rights to cash flows leads to a plethora of institutional designs. When asset liquidity is high, shareholder rights are enforced through the option to liquidate as in a mutual fund. When the opacity of corporate assets is relatively high and asset liquidity is relatively low, firms will eschew reliance on board monitoring and instead rely on shareholder activism. An increase in the cost of ownership concentration, by increasing the inefficiency of shareholder activism, will increase the reliance on board activism and decrease the reliance on CEO compensation. Decreases in the cost of enforcement of shareholder rights and the opacity of corporate assets, and increased raider activity further strengthen the preference for activist boards. |
| spellingShingle | Noe, T Rebello, M Sonti, R Activists, raiders, and directors: opportunism and the balance of corporate power |
| title | Activists, raiders, and directors: opportunism and the balance of corporate power |
| title_full | Activists, raiders, and directors: opportunism and the balance of corporate power |
| title_fullStr | Activists, raiders, and directors: opportunism and the balance of corporate power |
| title_full_unstemmed | Activists, raiders, and directors: opportunism and the balance of corporate power |
| title_short | Activists, raiders, and directors: opportunism and the balance of corporate power |
| title_sort | activists raiders and directors opportunism and the balance of corporate power |
| work_keys_str_mv | AT noet activistsraidersanddirectorsopportunismandthebalanceofcorporatepower AT rebellom activistsraidersanddirectorsopportunismandthebalanceofcorporatepower AT sontir activistsraidersanddirectorsopportunismandthebalanceofcorporatepower |