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Incentives to Corporate Governance Activism


  • Leech, Dennis

    (University of Warwick)


This paper considers incentives faced by investors (financial institutions) to become actively involved in the governance of under-performing companies in their portfolio as recently proposed. By considering the private benefits and the costs of investor activism separately, it questions the conventional wisdom -based on simplistic agency theory - that share ownership is so widely held in the UK that such incentives are too weak for shareholder activism to be a rational basis of a system of corporate governance. It finds that in many cases, by contrast, these incentives would be very strong indeed if conflicts of interest could be avoided.

Suggested Citation

  • Leech, Dennis, 2003. "Incentives to Corporate Governance Activism," Royal Economic Society Annual Conference 2003 133, Royal Economic Society.
  • Handle: RePEc:ecj:ac2003:133

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    References listed on IDEAS

    1. Leech, Dennis, 1987. "Ownership Concentration and the Theory of the Firm: A Simple-Game-Theoretic Approach," Journal of Industrial Economics, Wiley Blackwell, vol. 35(3), pages 225-240, March.
    2. repec:hrv:faseco:30728046 is not listed on IDEAS
    3. Leech, Dennis & Leahy, John, 1991. "Ownership Structure, Control Type Classifications and the Performance of Large British Companies," Economic Journal, Royal Economic Society, vol. 101(409), pages 1418-1437, November.
    4. Tirole, Jean, 2001. "Corporate Governance," Econometrica, Econometric Society, vol. 69(1), pages 1-35, January.
    5. Shleifer, Andrei & Vishny, Robert W, 1997. " A Survey of Corporate Governance," Journal of Finance, American Finance Association, vol. 52(2), pages 737-783, June.
    6. Charkham, Jonathan & Simpson, Anne, 1999. "Fair Shares: The Future of Shareholder Power and Responsibility," OUP Catalogue, Oxford University Press, number 9780198292142, June.
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    Cited by:

    1. Silvio M. Brondoni, 2006. "Managerial Corporate Governance Communication," Symphonya. Emerging Issues in Management, University of Milano-Bicocca, issue 1 Corpora.
    2. Sreejith Das, 2011. "Criticality in games with multiple levels of approval," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 37(3), pages 373-395, September.

    More about this item


    Corporate governance; shareholder activism; incentives; free-rider problem; agency;

    JEL classification:

    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • L21 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Business Objectives of the Firm

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