Governance and Stakeholders

Abstract

This paper is intended for the Handbook of Corporate Governance. We are grateful to the editors, Ben Hermalin, Michael Weisbach, for helpful suggestions. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research. NBER working papers are circulated for discussion and comment purposes. They have not been peer-reviewed or been subject to the review by the NBER Board of Directors that accompanies official NBER publications.

Contracts Between Firms and Shareholders

“…Rather, activist owners often aim to generate trading profits over a few months or years, and commonly return their capital and a portion of their profits to their limited partners (e.g., Brav et al [2008]). These owners are often generalists who specialize in optimizing dividend policy and capital structure, 1 For example, see the surveys by Armstrong, Guay, and Weber [2010], Kim [2010, 2015a], Bushman and Smith [2001], Christensen, Nikolaev, and Wittenberg-Moerman [2016], Denes, Karpoff, and McWilliams [2017], Edmans [2014], Edmans and Holderness [2017], Ertimur and Ferri [2019], Gillan and Starks [2007], Khorana, Shivdasani, and Sigurdsson [2017], and Mehrotra and Morck [2017]. The importance of studying these contracts is evident in Hart's [2017] Nobel Prize article where he calls on researchers to study realworld contracts that involve shareholders.…”