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Corporate Control and the Stock Market

  • Stefano Demichelis
  • Klaus Ritzberger

This paper studies a general equilibrium model with an investor controlled firm. Shareholders can vote on the firm’s production plan in an assembly. Prior to that they may trade shares on the stock market. Since stock market trades determine the distribution of votes, trading is strategic. There is always an equilibrium, where share trades lead to owners deciding for competitive behavior, but there may also be equilibria, where monoplistic behavior prevails.

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File URL: http://www.carloalberto.org/assets/working-papers/no.60.pdf
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Paper provided by Collegio Carlo Alberto in its series Carlo Alberto Notebooks with number 60.

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Length: 30 pages
Date of creation: 2007
Date of revision:
Handle: RePEc:cca:wpaper:60
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  1. Ernst Maug & Bilge Yilmaz, 2002. "Two-Class Voting: A Mechanism for Conflict Resolution?," NajEcon Working Paper Reviews 391749000000000536, www.najecon.org.
  2. Egbert Dierker & Birgit Grodahl, 1995. "Profit maximization mitigates competition," Economic Theory, Springer, vol. 7(1), pages 139-160.
  3. Egbert Dierker & Birgit Grodal, 1996. "The Price Normalization Problem in Imperfect Competition and the Objective of the Firm," Discussion Papers 96-05, University of Copenhagen. Department of Economics.
  4. DeMarzo, Peter M, 1993. "Majority Voting and Corporate Control: The Rule of the Dominant Shareholder," Review of Economic Studies, Wiley Blackwell, vol. 60(3), pages 713-34, July.
  5. Jaskold Gabszewicz, Jean & Vial, Jean-Philippe, 1972. "Oligopoly "A la cournot" in a general equilibrium analysis," Journal of Economic Theory, Elsevier, vol. 4(3), pages 381-400, June.
  6. Mike Burkart & Denis Gromb & Fausto Panunzi, 1998. "Why Higher Takeover Premia Protect Minority Shareholders," Journal of Political Economy, University of Chicago Press, vol. 106(1), pages 172-204, February.
  7. Rydqvist, Kristian, 1996. "Takeover bids and the relative prices of shares that differ in their voting rights," Journal of Banking & Finance, Elsevier, vol. 20(8), pages 1407-1425, September.
  8. David Kelsey & Frank Milne, 2008. "Imperfect Competition and Corporate Governance," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 10(6), pages 1115-1141, December.
  9. Ritzberger, Klaus, 2005. "Shareholder voting," Economics Letters, Elsevier, vol. 86(1), pages 69-72, January.
  10. Bejan, Camelia, 2008. "Production and financial decisions under uncertainty," MPRA Paper 11033, University Library of Munich, Germany.
  11. Grossman, Sanford J. & Hart, Oliver D., 1988. "One share-one vote and the market for corporate control," Journal of Financial Economics, Elsevier, vol. 20(1-2), pages 175-202, January.
  12. Bengt Holmstrom & Jean Tirole, 1994. "Financial Intermediation, Loanable Funds and the Real Sector," Working papers 95-1, Massachusetts Institute of Technology (MIT), Department of Economics.
  13. Hirshleifer, David & Titman, Sheridan, 1990. "Share Tendering Strategies and the Success of Hostile Takeover Bids," Journal of Political Economy, University of Chicago Press, vol. 98(2), pages 295-324, April.
  14. Zingales, Luigi, 1994. "The Value of the Voting Right: A Study of the Milan Stock Exchange Experience," Review of Financial Studies, Society for Financial Studies, vol. 7(1), pages 125-48.
  15. Mark Bagnoli, Barton L. Lipman, 1988. "Successful Takeovers without Exclusion," Review of Financial Studies, Society for Financial Studies, vol. 1(1), pages 89-110.
  16. Ernst Maug & Bilge Yilmaz, 2002. "Two-Class Voting: A Mechanism for Conflict Resolution," American Economic Review, American Economic Association, vol. 92(5), pages 1448-1471, December.
  17. Franco Modigliani & Enrico Perotti, 1997. "Protection of minority interest and the development of security markets," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 18(7-8), pages 519-528.
  18. Camelia Bejan, 2008. "The objective of a privately owned firm under imperfect competition," Economic Theory, Springer, vol. 37(1), pages 99-118, October.
  19. Victor Dorofeenko & Larry Lang & Klaus Ritzberger & Jamsheed Shorish, 2008. "Who controls Allianz?," Annals of Finance, Springer, vol. 4(1), pages 75-103, January.
  20. Erkan YalÁin & Thomas I. Renstr–m, 2003. "Endogenous Firm Objectives," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 5(1), pages 67-94, 01.
  21. Sanford J. Grossman & Oliver D. Hart, 1980. "Takeover Bids, the Free-Rider Problem, and the Theory of the Corporation," Bell Journal of Economics, The RAND Corporation, vol. 11(1), pages 42-64, Spring.
  22. Ernst Maug & Bilge Yilmaz, 2002. "Two-Class Voting: A Mechanism for Conflict Resolution?," Levine's Working Paper Archive 391749000000000536, David K. Levine.
  23. Holger M. Müller & Fausto Panunzi, 2004. "Tender Offers and Leverage," The Quarterly Journal of Economics, MIT Press, vol. 119(4), pages 1217-1248, November.
  24. Roberts, Kevin W. S., 1977. "Voting over income tax schedules," Journal of Public Economics, Elsevier, vol. 8(3), pages 329-340, December.
  25. Harris, Milton & Raviv, Artur, 1988. "Corporate governance : Voting rights and majority rules," Journal of Financial Economics, Elsevier, vol. 20(1-2), pages 203-235, January.
  26. Frank Milne, 1981. "The firm's objective function as a collective choice problem," Public Choice, Springer, vol. 37(3), pages 473-486, January.
  27. Thomas Palfrey & Howard Rosenthal, 1983. "A strategic calculus of voting," Public Choice, Springer, vol. 41(1), pages 7-53, January.
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