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Large shareholders, monitoring, and ownership dynamics: Toward pure managerial firms?

Abstract : We study ownership dynamics when the manager and the large shareholder, both risk neutral, simultaneously choose effort and monitoring level respectively to serve their non-congruent interests.We show that there is a wedge between the valuation of shares by atomistic shareholders and the large shareholder's valuation. At the Markov-perfect equilibrium, the large shareholder divests her shares. If the incongruence of their interests is mild, divestment is drastic: all her shares are sold immediately. If their interests diverge sharply, the divestment is gradual in order to prevent a sharp fall in share price. In the limit the firm becomes purely managerial.
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https://hal-amu.archives-ouvertes.fr/hal-01499625
Contributor : Elisabeth Lhuillier <>
Submitted on : Friday, March 31, 2017 - 5:06:13 PM
Last modification on : Wednesday, August 5, 2020 - 3:13:45 AM

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  • HAL Id : hal-01499625, version 1

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Amal Hili, Didier Laussel, Ngo van Long. Large shareholders, monitoring, and ownership dynamics: Toward pure managerial firms?. Journal of Economic Dynamics and Control, Elsevier, 2013, 37 (3), pp.666--679. ⟨hal-01499625⟩

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