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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.

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Paper provided by Royal Economic Society in its series Royal Economic Society Annual Conference 2003 with number 133.

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Date of creation: 04 Jun 2003
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Handle: RePEc:ecj:ac2003:133
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  1. Tirole, Jean, 1999. "Corporate Governance," CEPR Discussion Papers 2086, C.E.P.R. Discussion Papers.
  2. 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 1418-37, November.
  3. Charkham, Jonathan & Simpson, Anne, 1999. "Fair Shares: The Future of Shareholder Power and Responsibility," OUP Catalogue, Oxford University Press, number 9780198292142, March.
  4. Andrei Shleifer & Robert W. Vishny, 1996. "A Survey of Corporate Governance," NBER Working Papers 5554, National Bureau of Economic Research, Inc.
  5. 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 225-40, March.
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