The Case for Mandatory Ownership Disclosure
The use of equity derivatives to conceal economic ownership of shares (“hidden ownership”) is increasingly drawing attention from the financial community, as is the exercise of voting power without corresponding economic interest (“empty voting”). Market participants and commentators have called for expansion of ownership disclosure rules, and policymakers on both sides of the Atlantic are now contemplating how to respond. Yet, in order to design appropriate responses it is key to understand why we have ownership disclosure rules in the first place. This understanding currently appears to be lacking, which may explain why we observe divergent approaches between countries. The case for mandatory ownership disclosure has also received remarkably little attention in the literature, which has focused almost exclusively on mandatory issuer disclosure. Perhaps this is because most people assume that ownership disclosure is a good thing. But why is such information important, and to whom? This paper aims to answer these fundamental questions, using the European disclosure regime as an example. First, the paper identifies two main objectives of ownership disclosure: improving market efficiency and corporate governance. Next, the paper explores the various mechanisms through which ownership disclosure performs these tasks. This sets the stage for an analysis of hidden ownership and empty voting that demonstrates why these phenomena are so problematic.
|Date of creation:||08 Mar 2009|
|Date of revision:||13 Mar 2009|
|Contact details of provider:|| Postal: Ludwigstraße 33, D-80539 Munich, Germany|
Web page: https://mpra.ub.uni-muenchen.de
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Alexander Dyck & Luigi Zingales, 2002.
"Private Benefits of Control: An International Comparison,"
NBER Working Papers
8711, National Bureau of Economic Research, Inc.
- Alexander Dyck & Luigi Zingales, 2004. "Private Benefits of Control: An International Comparison," Journal of Finance, American Finance Association, vol. 59(2), pages 537-600, 04.
- Dyck, Alexander & Zingales, Luigi, 2002. "Private Benefits of Control: An International Comparison," CEPR Discussion Papers 3177, C.E.P.R. Discussion Papers.
- David Hirshleifer & Siew Hong Teoh, 2003.
"Herd Behaviour and Cascading in Capital Markets: a Review and Synthesis,"
European Financial Management,
European Financial Management Association, vol. 9(1), pages 25-66.
- Hirshleifer, David & Teoh, Siew Hong, 2001. "Herd Behavior and Cascading in Capital Markets: A Review and Synthesis," MPRA Paper 5186, University Library of Munich, Germany.
- Leuz, Christian & Lins, Karl V. & Warnock, Francis E., 2007.
"Do Foreigners Invest Less in Poorly Governed Firms?,"
07-2, University of Pennsylvania, Wharton School, Weiss Center.
- Christian Leuz & Karl V. Lins & Francis E. Warnock, 2009. "Do Foreigners Invest Less in Poorly Governed Firms?," Review of Financial Studies, Society for Financial Studies, vol. 22(8), pages 3245-3285, August.
- Christian Leuz & Karl V. Lins & Francis E. Warnock, 2010. "Do Foreigners Invest Less in Poorly Governed Firms?," NBER Chapters, in: Corporate Governance National Bureau of Economic Research, Inc.
- Christian Leuz & Karl V. Lins & Francis E. Warnock, 2010. "Do Foreigners Invest Less in Poorly Governed Firms?," Review of Financial Studies, Society for Financial Studies, vol. 23(3), pages 3245-3285, March.
- Christian Leuz & Karl V. Lins & Francis E. Warnock, 2006. "Do Foreigners Invest Less in Poorly Governed Firms?," NBER Working Papers 12222, National Bureau of Economic Research, Inc.
- Loderer, Claudio & Roth, Lukas, 2005. "The pricing discount for limited liquidity: evidence from SWX Swiss Exchange and the Nasdaq," Journal of Empirical Finance, Elsevier, vol. 12(2), pages 239-268, March.
- Michael J. Aitken & Alex Frino & Michael S. McCorry & Peter L. Swan, 1998. "Short Sales Are Almost Instantaneously Bad News: Evidence from the Australian Stock Exchange," Journal of Finance, American Finance Association, vol. 53(6), pages 2205-2223, December.
- Lopez-de-Silanes, Florencio & Djankov, Simeon & La Porta, Rafael & Shleifer, Andrei, 2008.
"The Law and Economics of Self-dealing,"
2907526, Harvard University Department of Economics.
- Sugato Chakravarty, 2002.
"Stealth-Trading: Which Traders' Trades Move Stock Prices?,"
- Chakravarty, Sugato, 2001. "Stealth-trading: Which traders' trades move stock prices?," Journal of Financial Economics, Elsevier, vol. 61(2), pages 289-307, August.
- Susan E.K. Christoffersen & Christopher C. Geczy & David K. Musto & Adam V. Reed, 2007. "Vote Trading and Information Aggregation," Journal of Finance, American Finance Association, vol. 62(6), pages 2897-2929, December.
- Conac Pierre-Henri & Enriques Luca & Gelter Martin, 2007. "Constraining Dominant Shareholders' Self-Dealing: The Legal Framework in France, Germany, and Italy," European Company and Financial Law Review, De Gruyter, vol. 4(4), pages 491-528, December.
- Enriques Luca, 2004. "The Mandatory Bid Rule in the Takeover Directive: Harmonization Without Foundation?," European Company and Financial Law Review, De Gruyter, vol. 1(4), pages 440-457, December.
- Ekkehart Boehmer & Charles M. Jones & Xiaoyan Zhang, 2008. "Which Shorts Are Informed?," Journal of Finance, American Finance Association, vol. 63(2), pages 491-527, 04.
- Bozcuk, Aslihan & Lasfer, M. Ameziane, 2005. "The Information Content of Institutional Trades on the London Stock Exchange," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 40(03), pages 621-644, September.
- Thomsen, Steen & Pedersen, Torben & Kvist, Hans Kurt, 2006. "Blockholder ownership: Effects on firm value in market and control based governance systems," Journal of Corporate Finance, Elsevier, vol. 12(2), pages 246-269, January.
- Roberta Romano, 1998. "Empowering Investors: A Market Approach to Securities Regulation," Yale School of Management Working Papers ysm74, Yale School of Management.
When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:14139. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Joachim Winter)
If references are entirely missing, you can add them using this form.