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Control of Corporate Decisions: Shareholders vs. Management


  • Milton Harris
  • Artur Raviv


This article addresses the issue of whether shareholders would be better off with enhanced control over corporate decisions. The issue has been hotly debated in the recent literature. Our main contribution is to use formal modeling to uncover some factors overlooked in these arguments. For example, we show that claims that shareholder control would reduce value because shareholders lack sufficient information to make important decisions or because they have a non-value-maximizing agenda are flawed. We also show, however, that even if shareholders seek to maximize firm value and can delegate decisions to management, shareholders should not control all major decisions. The Author 2010. Published by Oxford University Press on behalf of The Society for Financial Studies. All rights reserved. For Permissions, please e-mail:, Oxford University Press.

Suggested Citation

  • Milton Harris & Artur Raviv, 2010. "Control of Corporate Decisions: Shareholders vs. Management," Review of Financial Studies, Society for Financial Studies, vol. 23(11), pages 4115-4147, November.
  • Handle: RePEc:oup:rfinst:v:23:y:2010:i:11:p:4115-4147

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    Cited by:

    1. Renneboog, Luc & Szilagyi, Peter G., 2011. "The role of shareholder proposals in corporate governance," Journal of Corporate Finance, Elsevier, vol. 17(1), pages 167-188, February.
    2. Meg Adachi-Sato, 2015. "Insular Decision Making in the Board Room: Why Boards Retain and Hire Substandard CEOs," Manchester School, University of Manchester, vol. 83(2), pages 183-216, March.
    3. Halit Gonenc & Bert Scholtens, 2019. "Responsibility and Performance Relationship in the Banking Industry," Sustainability, MDPI, vol. 11(12), pages 1-49, June.
    4. Tim Baldenius & Xiaojing Meng & Lin Qiu, 2021. "The value of board commitment," Review of Accounting Studies, Springer, vol. 26(4), pages 1587-1622, December.
    5. Leitner, Yaron & Yilmaz, Bilge, 2019. "Regulating a model," Journal of Financial Economics, Elsevier, vol. 131(2), pages 251-268.
    6. Tschöpel, Michael, 2013. "Erfolgsfaktoren der MemberValue-Strategie von Genossenschaftsbanken: Ergebnisse einer empirischen Erhebung," Arbeitspapiere 134, University of Münster, Institute for Cooperatives.
    7. Guthrie, Graeme & Hobbs, Cameron, 2021. "How managerial ownership and the market for corporate control can improve investment timing," Journal of Banking & Finance, Elsevier, vol. 128(C).
    8. Guthrie, Graeme, 2021. "A dynamic model of managerial entrenchment and the positive incentives it creates," Journal of Economic Dynamics and Control, Elsevier, vol. 123(C).
    9. Appel, Ian R. & Gormley, Todd A. & Keim, Donald B., 2016. "Passive investors, not passive owners," Journal of Financial Economics, Elsevier, vol. 121(1), pages 111-141.
    10. Bo Becker & Daniel Bergstresser & Guhan Subramanian, 2013. "Does Shareholder Proxy Access Improve Firm Value? Evidence from the Business Roundtable's Challenge," Journal of Law and Economics, University of Chicago Press, vol. 56(1), pages 127-160.
    11. Ashwini K. Agrawal, 2012. "Corporate Governance Objectives of Labor Union Shareholders: Evidence from Proxy Voting," Review of Financial Studies, Society for Financial Studies, vol. 25(1), pages 187-226.
    12. Meg Adachi-Sato, 2010. "Insular Decision Making in the Board Room: Why Boards Retain and Hire Substandard CEOs," CIRJE F-Series CIRJE-F-710, CIRJE, Faculty of Economics, University of Tokyo.
    13. Bruno Maria Parigi & Loriana Pelizzon & Ernst-Ludwig von Thadden, 2013. "Stock Market Returns, Corporate Governance and Capital Market Equilibrium," CESifo Working Paper Series 4496, CESifo.
    14. Akbar, Muhammad & Hussain, Shahzad & Ahmad, Tanveer & Hassan, Shoib, 2020. "Corporate Governance and Firm Performance in Pakistan: Dynamic Panel Estimation," CAFE Working Papers 6, Centre for Applied Finance and Economics (CAFE), Birmingham City Business School, Birmingham City University.
    15. Dicks, David & Fulghieri, Paolo, 2015. "Ambiguity, Disagreement, and Allocation of Control in Firms," CEPR Discussion Papers 10400, C.E.P.R. Discussion Papers.
    16. Wang, Yong & Mao, Connie X., 2015. "Shareholder activism of public pension funds: The political facet," Journal of Banking & Finance, Elsevier, vol. 60(C), pages 138-152.
    17. Canil, Jean & Karpavičius, Sigitas & Yu, Chia-Feng, 2019. "Are shareholders gender neutral? Evidence from say on pay," Journal of Corporate Finance, Elsevier, vol. 58(C), pages 169-186.
    18. Walid Cheffi & Sonia Abdennadher, 2019. "Executives’ Behaviour and Innovation in Corporate Governance: The Case of Internet Voting at Shareholders’ General Meetings in French Listed Companies," Journal of Business Ethics, Springer, vol. 156(3), pages 775-798, May.
    19. Yaron Leitner & Bilge Yilmaz, 2016. "Regulating A Model," Working Papers 16-31, Federal Reserve Bank of Philadelphia.
    20. Isaka, Naoto, 2017. "When are uninformed boards preferable?," Pacific-Basin Finance Journal, Elsevier, vol. 46(PA), pages 191-211.
    21. Foley, Maggie & Cebula, Richard & Jun, Chulhee, 2013. "An Analysis of Withdrawn Shareholder Proposals," MPRA Paper 55422, University Library of Munich, Germany.

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