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Portfolio diversification and internalization of production externalities through majority voting

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  • Crès, Hervé

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  • Tvede, Mich

Abstract

In absence of markets for externalities, the authors look for governances and conditions under which majority voting among shareholders is likely to give rise to efficient internalization. The central and natural role played by a governance of stakeholders is underlined and benchmarked.

Suggested Citation

  • Crès, Hervé & Tvede, Mich, 2006. "Portfolio diversification and internalization of production externalities through majority voting," HEC Research Papers Series 816, HEC Paris.
  • Handle: RePEc:ebg:heccah:0816
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    References listed on IDEAS

    as
    1. Grandmont, Jean-Michel, 1978. "Intermediate Preferences and the Majority Rule," Econometrica, Econometric Society, vol. 46(2), pages 317-330, March.
    2. Grossman, Sanford J & Hart, Oliver D, 1979. "A Theory of Competitive Equilibrium in Stock Market Economies," Econometrica, Econometric Society, vol. 47(2), pages 293-329, March.
    3. Caplin, Andrew & Nalebuff, Barry, 1991. "Aggregation and Social Choice: A Mean Voter Theorem," Econometrica, Econometric Society, vol. 59(1), pages 1-23, January.
    4. Greenberg, Joseph, 1979. "Consistent Majority Rules over Compact Sets of Alternatives," Econometrica, Econometric Society, vol. 47(3), pages 627-636, May.
    5. Sadanand, Asha B & Williamson, John M, 1991. "Equilibrium in a Stock Market Economy with Shareholder Voting," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 32(1), pages 1-35, February.
    6. Bergstrom, Ted C, 1979. " When Does Majority Rule Supply Public Goods Efficiently?," Scandinavian Journal of Economics, Wiley Blackwell, vol. 81(2), pages 216-226.
    7. Caplin, Andrew S & Nalebuff, Barry J, 1988. "On 64%-Majority Rule," Econometrica, Econometric Society, vol. 56(4), pages 787-814, July.
    8. CRES, Hervé & TVEDE, Mich, 2004. "The Dreze and Grossman-Hart criteria for production in incomplete markets: Voting foundations and compared political stability," HEC Research Papers Series 794, HEC Paris.
    9. Kelsey, David & Milne, Frank, 1996. "The existence of equilibrium in incomplete markets and the objective function of the firm," Journal of Mathematical Economics, Elsevier, vol. 25(2), pages 229-245.
    10. Barlow, Robin, 1970. "Efficiency Aspects of Local School Finance," Journal of Political Economy, University of Chicago Press, vol. 78(5), pages 1028-1040, Sept.-Oct.
    11. Cass, David & Stiglitz, Joseph E., 1970. "The structure of investor preferences and asset returns, and separability in portfolio allocation: A contribution to the pure theory of mutual funds," Journal of Economic Theory, Elsevier, vol. 2(2), pages 122-160, June.
    12. Hansen, Robert G. & Lott, John R., 1996. "Externalities and Corporate Objectives in a World with Diversified Shareholder/Consumers," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 31(01), pages 43-68, March.
    13. Howard R. Bowen, 1943. "The Interpretation of Voting in the Allocation of Economic Resources," The Quarterly Journal of Economics, Oxford University Press, vol. 58(1), pages 27-48.
    14. Peter M. DeMarzo, 1993. "Majority Voting and Corporate Control: The Rule of the Dominant Shareholder," Review of Economic Studies, Oxford University Press, vol. 60(3), pages 713-734.
    15. Simon Benninga & Eitan Muller, 1979. "Majority Choice and the Objective Function of the Firm under Uncertainty," Bell Journal of Economics, The RAND Corporation, vol. 10(2), pages 670-682, Autumn.
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    Cited by:

    1. Hervé Crès & M. Utku Ünver, 2010. "Ideology and Existence of 50%-Majority Equilibria in Multidimensional Spatial Voting Models," Journal of Theoretical Politics, , vol. 22(4), pages 431-444, October.
    2. Azar, José & Schmalz, Martin & Tecu, Isabel, 2017. "Anti-Competitive Effects of Common Ownership," IESE Research Papers D/1169, IESE Business School.

    More about this item

    Keywords

    Production externalities; majority voting; portfolio diversification; general equilibrium; stakeholder governance; mean voter;

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • D52 - Microeconomics - - General Equilibrium and Disequilibrium - - - Incomplete Markets
    • D71 - Microeconomics - - Analysis of Collective Decision-Making - - - Social Choice; Clubs; Committees; Associations
    • G39 - Financial Economics - - Corporate Finance and Governance - - - Other

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