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Ownership Dynamics and Firm Policies with a Large Shareholder

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  • Gryglewicz, Sebastian
  • Mayer, Simon
  • Morellec, Erwan

Abstract

We develop a dynamic theory of large shareholders and firm policies, where a blockholder engages with the firm to improve asset productivity and influence decisions on investment, financing, and executive compensation. In equilibrium, the blockholder’s ownership stake may grow or shrink over time driven by gains from trade that result from the relationship between ownership, corporate policies, and control. A feedback loop emerges: as the blockholder increases their ownership, it boosts investment and the firm's debt capacity, while higher returns from debt and investment incentivize the blockholder to increase their stake. While firm policies need not maximize dispersed shareholder value when the blockholder is in control, limiting blockholder influence ultimately reduces blockholder ownership and firm value.

Suggested Citation

  • Gryglewicz, Sebastian & Mayer, Simon & Morellec, Erwan, 2026. "Ownership Dynamics and Firm Policies with a Large Shareholder," CEPR Discussion Papers 21226, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:21226
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    File URL: https://cepr.org/publications/DP21226
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