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Large shareholders, monitoring, and ownership dynamics: Toward pure managerial firms?

Author

Listed:
  • Amal Hili
  • Didier Laussel

    (GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique)

  • Ngo van Long

Abstract

We study ownership dynamics when the manager and the large shareholder, both risk neutral, simultaneously choose effort and monitoring level respectively to serve their non-congruent interests.We show that there is a wedge between the valuation of shares by atomistic shareholders and the large shareholder's valuation. At the Markov-perfect equilibrium, the large shareholder divests her shares. If the incongruence of their interests is mild, divestment is drastic: all her shares are sold immediately. If their interests diverge sharply, the divestment is gradual in order to prevent a sharp fall in share price. In the limit the firm becomes purely managerial.

Suggested Citation

  • Amal Hili & Didier Laussel & Ngo van Long, 2013. "Large shareholders, monitoring, and ownership dynamics: Toward pure managerial firms?," Post-Print hal-01499625, HAL.
    • Handle: RePEc:hal:journl:hal-01499625
    DOI: 10.1016/j.jedc.2012.10.006
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    Cited by:

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    4. Ngo Long, 2015. "Dynamic Games Between Firms and Infinitely Lived Consumers: A Review of the Literature," Dynamic Games and Applications, Springer, vol. 5(4), pages 467-492, December.

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    More about this item

    Keywords

    Managerial firms; Ownership dynamics;

    JEL classification:

    • G3 - Financial Economics - - Corporate Finance and Governance

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