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Incentives to Corporate Governance Activism

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  • Leech, Dennis

    (University of Warwick)

Abstract

This paper considers incentives faced by investors (financial institutions) to become actively involved in the governance of under-performing companies in their portfolio as recently proposed. By considering the private benefits and the costs of investor activism separately, it questions the conventional wisdom -based on simplistic agency theory - that share ownership is so widely held in the UK that such incentives are too weak for shareholder activism to be a rational basis of a system of corporate governance. It finds that in many cases, by contrast, these incentives would be very strong indeed if conflicts of interest could be avoided.

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Bibliographic Info

Paper provided by Royal Economic Society in its series Royal Economic Society Annual Conference 2003 with number 133.

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Date of creation: 04 Jun 2003
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Handle: RePEc:ecj:ac2003:133

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Keywords: Corporate governance; shareholder activism; incentives; free-rider problem; agency;

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References

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  1. Tirole, Jean, 2001. "Corporate Governance," Econometrica, Econometric Society, vol. 69(1), pages 1-35, January.
  2. Leech, D. & Leahy, J., 1989. "Ownership Structure, Control Type Classifications And The Performance Of Large British Companies," The Warwick Economics Research Paper Series (TWERPS) 345, University of Warwick, Department of Economics.
  3. Andrei Shleifer & Robert W. Vishny, 1996. "A Survey of Corporate Governance," NBER Working Papers 5554, National Bureau of Economic Research, Inc.
  4. Charkham, Jonathan & Simpson, Anne, 1999. "Fair Shares: The Future of Shareholder Power and Responsibility," OUP Catalogue, Oxford University Press, number 9780198292142, September.
  5. Leech, Dennis, 1987. "Ownership Concentration and the Theory of the Firm: A Simple-Game-Theoretic Approach," Journal of Industrial Economics, Wiley Blackwell, vol. 35(3), pages 225-40, March.
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Cited by:
  1. Silvio M. Brondoni, 2006. "Managerial Corporate Governance Communication," Symphonya. Emerging Issues in Management, University of Milano-Bicocca, issue 1 Corpora.
  2. Sreejith Das, 2011. "Criticality in games with multiple levels of approval," Social Choice and Welfare, Springer, vol. 37(3), pages 373-395, September.

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