Activists, Raiders, and Directors: Opportunism and the Balance of Corporate Power

Noe, T H and Rebello, M J and Sonti, R Activists, Raiders, and Directors: Opportunism and the Balance of Corporate Power. Working Paper. SSRN, Indian School of Business. (Submitted)

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Abstract

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.

Affiliation: Indian School of Business
ISB Creators:
ISB CreatorsORCiD
Sonti, Rhttps://orcid.org/0000-0001-7540-4243
Item Type: Monograph (Working Paper)
Uncontrolled Keywords: Corporate Governance, Securities Markets, Shareholders
Depositing User: Mohan Dass
Date Deposited: 11 Jun 2019 09:17
Last Modified: 11 Jun 2019 09:17
URI: http://eprints.exchange.isb.edu/id/eprint/1061
Publisher URL: https://papers.ssrn.com/sol3/papers.cfm?abstract_i...
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