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Constraints on Large-Block Shareholders

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  • Clifford G. Holderness
  • Dennis P. Sheehan
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    Abstract

    Corporate managers who own a majority of the common stock in their company or who represent another firm owning such an interest appear to be less constrained than managers of diffusely held firms, yet their power to harm minority shareholders must be circumscribed by some organizational or legal arrangements. Empirical investigations reveal that boards of directors in majority-owned firms are little different from firms with diffuse stock ownership. Another source of constraints on a majority shareholders -- capital market activity -- also appears to be no different from firms with diffuse ownership. Finally, there is little evidence that new organizational mechanisms have evolved to constrain managers who own large blocks of stock. The frequency and associated wealth effects of reorganizations of majority shareholder firms, however, indicate that the law constrains managerial majority shareholders, both in their day-to-day management and when they redeem the ownership interest of minority shareholders.

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    Bibliographic Info

    Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 6765.

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    Date of creation: Oct 1998
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    Publication status: published as Constraints on Large-Block Shareholders , Clifford Holderness, Dennis P. Sheehan. in Concentrated Corporate Ownership , Morck. 2000
    Handle: RePEc:nbr:nberwo:6765

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    Cited by:
    1. Pop, Diana & Pop, Adrian & Chemla, Gilles, 2010. "Privatization and governance regulation in frontier emerging markets: The case of Romania," Economics Papers from University Paris Dauphine 123456789/7707, Paris Dauphine University.

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