The Shareholder’s Dilemma

Theoretical and empirical research on shareholder voting has provided many exciting insights and guidance for debates on policy and regulation. The default assumption, though, is that shareholders have strong incentives to vote for alternatives that they think are best for the firm.   In our paper, available here, we show that, when shareholders have the opportunity to buy or sell shares after voting, there can be strong incentives to vote against the firm’s interest. The presence of this incentive confounds the potential for shareholder voting to aggregate information and serve as a check on management.

We develop a game-theoretic model … Read more