Advanced Search
MyIDEAS: Login to save this paper or follow this series

A Defense of Shareholder Favoritism

Contents:

Author Info

  • Choi, Stephen J.
  • Talley, Eric L.
Registered author(s):

    Abstract

    This paper considers the efficiency implications of managerial "favoritism" towards block shareholders of public corporations. While favoritism can take any number of forms (including the payment of greenmail, diversion of opportunities, selective information disclosure, and the like), each may have the effect (if not the intent) of securing a block shareholder's loyalty in order to entrench management. Accordingly, the practice of making side payments is commonly perceived to be contrary to other shareholders' interests and, more generally, inefficient. In contrast to this received wisdom, we argue that when viewed ex ante, permissible acts of patronage toward block shareholders may play an important efficiency role that benefits all shareholders alike. We demonstrate that the prospect of having to share rents with a third party may itself have a deterrent effect on managerial self-dealing - an off-equilibrium benefit that would not be readily apparent if one looked only at instances where favoritism actually occurs in practice.

    Download Info

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
    File URL: http://www.escholarship.org/uc/item/1z97645j.pdf;origin=repeccitec
    Download Restriction: no

    Bibliographic Info

    Paper provided by Berkeley Olin Program in Law & Economics in its series Berkeley Olin Program in Law & Economics, Working Paper Series with number qt1z97645j.

    as in new window
    Length:
    Date of creation: 01 Jul 2001
    Date of revision:
    Handle: RePEc:cdl:oplwec:qt1z97645j

    Contact details of provider:
    Postal: Boalt Hall, Berkeley, CA 94720
    Fax: (510) 642-3767
    Email:
    Web page: http://www.escholarship.org/repec/blewp/
    More information through EDIRC

    Related research

    Keywords:

    References

    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.:
    as in new window
    1. Easterbrook, Frank H & Fischel, Daniel R, 1983. "Voting in Corporate Law," Journal of Law and Economics, University of Chicago Press, vol. 26(2), pages 395-427, June.
    2. Andrei Shleifer & Lawrence H. Summers, 1987. "Breach of Trust in Hostile Takeovers," NBER Working Papers 2342, National Bureau of Economic Research, Inc.
    3. Nash, John, 1950. "The Bargaining Problem," Econometrica, Econometric Society, vol. 18(2), pages 155-162, April.
    4. Zvika NEEMAN & Gerhard O. OROSEL, 1999. "Corporate Vote-Trading as an Instrument of Corporate Governance," Vienna Economics Papers vie9904, University of Vienna, Department of Economics.
    Full references (including those not matched with items on IDEAS)

    Citations

    Lists

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    Statistics

    Access and download statistics

    Corrections

    When requesting a correction, please mention this item's handle: RePEc:cdl:oplwec:qt1z97645j. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Lisa Schiff).

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.