Activists, raiders, and directors: Opportunism and the balance of corporate power
We model corporate governance in a world with competitive securities markets as well as markets for corporate assets. We show that varying the liquidity and opacity of corporate assets, the vitality of the market for corporate control, and the costs of enforcing shareholder rights to cash flows leads to a plethora of institutional designs. When asset liquidity is high, shareholder rights are enforced through the option to liquidate as in a mutual fund. When the opacity of corporate assets is relatively high and asset liquidity is relatively low, firms will eschew reliance on board monitoring and instead rely on shareholder activism. An increase in the cost of ownership concentration, by increasing the inefficiency of shareholder activism, will increase the reliance on board activism and decrease the reliance on CEO compensation. Decreases in the cost of enforcement of shareholder rights and the opacity of corporate assets, and increased raider activity further strengthen the preference for activist boards.
When requesting a correction, please mention this item's handle: RePEc:sbs:wpsefe:2008fe09. 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: (Maxine Collett)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.