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Portfolio Diversification and Internalization of Production Externalities through Majority Voting

Author

Listed:
  • Hervé Crès

    (GREGH - Groupement de Recherche et d'Etudes en Gestion à HEC - HEC Paris - Ecole des Hautes Etudes Commerciales - CNRS - Centre National de la Recherche Scientifique)

  • Mich Tvede

Abstract

A general equilibrium model with uncertainty and production externalities is studied. In absence of markets for externalities, we look for governances and conditions under which majority voting among shareholders is likely to give rise to efficient internalization. We argue that the financial market clearing conditions endogenously set up, within the firms, social choice configurations where the (perfectly diversified) market portfolio, which gives the right incentives for economic efficiency, happens to be a good (and sometimes the best) candidate in the political process, i.e., a candidate with good stability properties with respect to the majority rule. The central and natural role played by a governance of stakeholders is underlined and benchmarked.

Suggested Citation

  • Hervé Crès & Mich Tvede, 2005. "Portfolio Diversification and Internalization of Production Externalities through Majority Voting," Working Papers hal-00587205, HAL.
    • Handle: RePEc:hal:wpaper:hal-00587205
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    Cited by:

    1. repec:spo:wpmain:info:hdl:2441/eu4vqp9ompqllr09iepsg269m is not listed on IDEAS
    2. 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.
    3. Hervé Crès & Utku Unver, 2005. "Ideology and existence of 50% : Majority equilibria in multidimensional spatial voting models," SciencePo Working papers hal-01065582, HAL.
    4. repec:spo:wpmain:info:hdl:2441/10277 is not listed on IDEAS
    5. Azar, José & Schmalz, Martin & Tecu, Isabel, 2017. "Anti-Competitive Effects of Common Ownership," IESE Research Papers D/1169, IESE Business School.
    6. repec:spo:wpecon:info:hdl:2441/10277 is not listed on IDEAS

    More about this item

    Keywords

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    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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