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Ownership structure, Voting, and Risk

Author

Listed:
  • Amrita Dhillon
  • Silvia Rossetto

    (Finance - CRM - Centre de Recherche en Management - UT Capitole - Université Toulouse Capitole - Comue de Toulouse - Communauté d'universités et établissements de Toulouse - IAE - Institut d'Administration des Entreprises - Toulouse - CNRS - Centre National de la Recherche Scientifique)

Abstract

We analyze the determinants of a firm's ownership structure when decisions over risk are taken by majority vote of risk-averse shareholders. We show that when a fraction of small, diversified shareholders abstains from voting, mid-sized blockholders may emerge to mitigate the conflict of interests between one large shareholder, who prefers less risky investments, and these small, non-voting shareholders. The paper offers a novel explanation for the puzzling observation that many firms have multiple blockholders. The paper develops numerous empirical implications, for example on the link between ownership structure and risk choices and on the relative size of blocks.

Suggested Citation

  • Amrita Dhillon & Silvia Rossetto, 2015. "Ownership structure, Voting, and Risk," Post-Print halshs-01398605, HAL.
    • Handle: RePEc:hal:journl:halshs-01398605
    DOI: 10.1093/rfs/hhu071
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