Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/208421 
Year of Publication: 
1999
Series/Report no.: 
Working paper No. 10-99
Publisher: 
Copenhagen Business School (CBS), Department of Economics, Frederiksberg
Abstract: 
We analyze a closely held corporation characterized by the absence of a resale market for shares and by potentially having several significant shareholders. The founder of the firm may optimally choose to distribute voting power to several large shareholders since this forces them to form coalitions to obtain control. A coalition, by grouping the cash flows of its members, internalizes to a larger extent the consequences of its actions and hence takes more efficient actions than its individual members. The model has other implications for the ownership structure of a closely held corporation: A one-share-one-vote rule improves efficiency; the optimal ownership structure has either one dominant shareholder or several equal-sized shareholders; and finally, efficiency decreases with the number of significant shareholders.
Subjects: 
Closely held corporations
Ownership structure
Control dilution
Control coalition
One share - one vote
JEL: 
G32
G34
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by-nc-nd Logo
Document Type: 
Working Paper

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