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Ownership structure, Voting and Risk

Research output: Contribution to journalArticle

Amrita Dhillon, Silvia Rossetto

Original languageEnglish
Pages (from-to)521-560
Issue number2
Early online date13 Oct 2014
Publication statusPublished - 2015

King's Authors


We analyze the determinants of a firm's ownership structure when
shareholders' preferences over the firm's risk exposure depend on the size
of their stake. Large shareholders may then prefer less risky investments
compared to small, well diversified shareholders. We assume that decisions
over risk exposure are taken by a shareholder vote and that only a fraction of
the small shareholders participate in that vote. We show that mid-sized
blockholders may emerge in this case so as to mitigate the conflict of
interest between one large and many small shareholders. The paper thus
offers a novel explanation for the puzzling observation that many firms have
multiple blockholders, with no apparent governance role suggested by the
theoretical literature. The paper also develops numerous empirical
implications, for example about the relative size of blocks in firms with
multiple blockholders.

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