Governance and Comovement Under Common Ownership

Edmans, Alex; Levit, Doron; Reilly, Devin

doi:10.3386/w20420

Cited by 6 publications

(1 citation statement)

References 44 publications

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“…Firms have common shareholders when investors hold a large number of shares in multiple firms (Connelly et al, 2019). Following former studies (Connelly et al, 2019; Edmans et al, 2014), we first checked whether firms had the same shareholders to generate this variable. If two firms shared the same shareholder, one was deemed to be the investee peer firm of the other.…”

Section: Methodsmentioning

confidence: 99%

Keeping up with the Joneses: The role of investee peers corporate environmental responsibility

Dong

Chen

2023

Corp Soc Responsibility Env

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Scholars have investigated the industry peer effect of corporate social responsibility (CSR). Borrowing from the awareness-motivation-capability (AMC) framework from competitive dynamics literature, we shift attention to focus on an important but neglected peer-investee peers-and argue that the corporate environmental responsibility (CER) of investee peers positively affects a focal firm's CER. Using data from Chinese listed firms from 2008 to 2018, we find that firms invest more on CER in response to increasing CER investment by investee peer firms (more awareness). This relationship is further affected by the firm's motivation (when the common shareholder is a foreign investor) and ability (when the focal firm's financial performance is high) to respond to competitive threats and tensions from investee peers. Our study contributes to the literature on CSR (specifically CER) by introducing the role of investee peers and extending the AMC framework to the CER literature.

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Section: Methodsmentioning

confidence: 99%

Keeping up with the Joneses: The role of investee peers corporate environmental responsibility

Dong

Chen

2023

Corp Soc Responsibility Env

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Shareholder Protection: The Role of Multiple Large Shareholders

Barroso

Burkert

Dávila

et al. 2015

Corporate Governance

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Manuscript Type: EmpiricalResearch Question/Issue: This paper addresses the effect of having multiple large shareholders on shareholder protection. More specifically, we examine to what extent this effect depends on whether such large shareholders are beneficiary or fiduciary. Research Findings/Insights: Analyzing longitudinal, hand-collected data covering Swiss listed companies, we find that having several large shareholders leads to overall higher shareholder protection (i.e. adoption of more formal corporate governance mechanisms). This is because large shareholders have an interest in putting more formal governance mechanisms in place when there is another large shareholder that might try to extract rents at the expense of others. Moreover, we find that this effect is driven by the presence of several beneficiary shareholders, i.e. shareholders that invest their own wealth in the company in contrast to dispersed ownership and fiduciary shareholders, i.e. shareholders acting on behalf of others. Theoretical/Academic Implications: Building on recent developments in agency theory, this paper contributes to the corporate governance literature by empirically showing that potential "principal-principal" conflicts among large shareholders lead to overall better shareholder protection in terms of more formal governance mechanisms being adopted. This finding contrasts with situations in which there is only one large shareholder that does not have an interest in strengthening formal corporate governance. Our findings imply, however, that the characteristics of the large shareholders matter: Fiduciary shareholders in the Swiss setting are mostly passive buy-and-hold shareholders and therefore do not engage extensively in improving shareholder protection. Beneficiary shareholders, in contrast, directly intervene in the governance of the firm (i.e. governance by voice), so that in the presence of multiple beneficiary shareholders, more formal governance mechanisms help to monitor not only management but the other large shareholders as well. In addition, more formal governance mechanisms serve as a platform to coordinate their diverging objectives. Practitioner Implications: We demonstrate the influence of a second (or several) large beneficiary shareholder(s), on corporate governance and the benefit to all shareholders. In addition, we propose the strengthening of governance mechanisms as a platform to reconcile conflicting interests among prominent shareholders and contribute to the debate on the allocation of certain voting privileges to long-term shareholders.

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Blockholders and Corporate Governance

Edmans

2014

Annu. Rev. Financ. Econ.

Self Cite

371

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This paper reviews the theoretical and empirical literature on the channels through which blockholders (large shareholders) engage in corporate governance. In classical models, blockholders exert governance through direct intervention in a firm’s operations, otherwise known as “voice.” These theories have motivated empirical research on the determinants and consequences of activism. More recent models show that blockholders can govern through an alternative mechanism known as “exit”—selling their shares if the manager underperforms. These theories give rise to new empirical studies on the two-way relationship between blockholders and financial markets, linking corporate finance with asset pricing. Blockholders may also worsen governance by extracting private benefits of control or pursuing objectives other than firm value maximization. I highlight the empirical challenges in identifying causal effects of and on blockholders as well as the typical strategies attempted to achieve identification. I close with directions for future research.

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Governance and Comovement Under Common Ownership

Cited by 6 publications

References 44 publications

Keeping up with the Joneses: The role of investee peers corporate environmental responsibility

Keeping up with the Joneses: The role of investee peers corporate environmental responsibility

Shareholder Protection: The Role of Multiple Large Shareholders

Blockholders and Corporate Governance

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