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Shareholder voting and efficient corporate decision-making

Author

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  • Lee, Kyounghun
  • Oh, Frederick Dongchuhl

Abstract

This study assesses the effects of shareholder voting on a firm’s decision-making by considering two voting methods: majority voting (MV) and quadratic voting (QV). Under MV, shareholders obtain voting rights in proportion to their shares, while under QV, they pay costs to buy voting rights. Our model demonstrates that under both MV and QV, the firm’s decision is efficient if shareholders collectively make the voting decisions. Moreover, shareholders can benefit from share trades resulting in the firm’s efficient decision.

Suggested Citation

  • Lee, Kyounghun & Oh, Frederick Dongchuhl, 2024. "Shareholder voting and efficient corporate decision-making," Research in Economics, Elsevier, vol. 78(4).
    • Handle: RePEc:eee:reecon:v:78:y:2024:i:4:s1090944324000747
    DOI: 10.1016/j.rie.2024.101010
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    References listed on IDEAS

    as
    1. Alessandra Casella & Antonin Macé, 2021. "Does Vote Trading Improve Welfare?," Annual Review of Economics, Annual Reviews, vol. 13(1), pages 57-86, August.
    2. David Yermack, 2010. "Shareholder Voting and Corporate Governance," Annual Review of Financial Economics, Annual Reviews, vol. 2(1), pages 103-125, December.
    3. Peter M. DeMarzo, 1993. "Majority Voting and Corporate Control: The Rule of the Dominant Shareholder," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 60(3), pages 713-734.
    4. Brav, Alon & Mathews, Richmond D., 2011. "Empty voting and the efficiency of corporate governance," Journal of Financial Economics, Elsevier, vol. 99(2), pages 289-307, February.
    5. John C. Goodman & Philip K. Porter, 2021. "Will quadratic voting produce optimal public policy?," Public Choice, Springer, vol. 186(1), pages 141-148, January.
    6. Peter Iliev & Karl V. Lins & Darius P. Miller & Lukas Roth, 2015. "Editor's Choice Shareholder Voting and Corporate Governance Around the World," The Review of Financial Studies, Society for Financial Studies, vol. 28(8), pages 2167-2202.
    7. Ben Laurence & Itai Sher, 2017. "Ethical considerations on quadratic voting," Public Choice, Springer, vol. 172(1), pages 195-222, July.
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Shareholder voting; Quadratic voting; Majority voting; Voting efficiency; Core;
    All these keywords.

    JEL classification:

    • C71 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Cooperative Games
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models
    • K22 - Law and Economics - - Regulation and Business Law - - - Business and Securities Law

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