Shareholder Heterogeneity and Shareholder Democracy
| Název práce v češtině: | Rozdíly mezi vlastníky firem a vlastnická demokracie |
|---|---|
| Název v anglickém jazyce: | Shareholder Heterogeneity and Shareholder Democracy |
| Klíčová slova: | správa podniků, kolektivní rozhodování, ESG |
| Klíčová slova anglicky: | corporate governance, collective decision-making, ESG |
| Akademický rok vypsání: | 2022/2023 |
| Typ práce: | bakalářská práce |
| Jazyk práce: | angličtina |
| Ústav: | Institut ekonomických studií (23-IES) |
| Vedoucí / školitel: | doc. PhDr. Martin Gregor, Ph.D. |
| Řešitel: | skrytý - zadáno vedoucím/školitelem |
| Datum přihlášení: | 26.06.2023 |
| Datum zadání: | 26.06.2023 |
| Zásady pro vypracování |
| Research question and motivation
In my thesis, the main research question I intend to study is how different preferences over non-financial company policies (e.g. ESG) affect shareholder’s trading and voting about implementation of the policy. Motivation is two-fold: First, we observe a greater role of direct shareholder voting over company policies. Second, we observe a greater number of objectives that the company follows (in addition to the profit objective) and this opens the door for a greater heterogeneity in preferences of the shareholders. In today's society, the voting power has shifted from the board of directors towards the shareholders (Hayden and Bodie, 2008). This shift of power enabled shareholders to not only elect directors, but also vote on the different policy implementations such as executive compensations on environmental and social (E&S) issues. Moreover, as the data suggest, shareholders are nowadays more likely to care about the influence which different policies impose on society and environment. More than 30% of proposals in recent years are related to E&S issues (Bolton et al. 2020). Resulting from this trend, the valuation of shares is partly determined by the decisions of the firm in these questions. My thesis builds on the expectation of multidimensional preferences (especially over E&S issues) and studies how the multi-dimensional preferences of shareholders generate self-fulfilling expectations. The thesis will study two specific topics: 1. Composition of shareholder bases: To what extent are shareholders homogenous and how homogeneity/heterogeneity depends on the underlying distribution of (multidimensional) policy preferences? Can we observe that firms will be large and heterogeneous or rather small and homogeneous? 2. Multiple equilibria: It has been shown in Levit et al.(2022) that voting and trading are complementary. The complementarity may (but may not) give rise to multiple equilibria. We will study how the underlying distribution of (multidimensional) policy preferences affect whether multiple equilibria exist or not. The issue is important for two reasons: (i) With multiple equilibria, we must explain heterogeneity in policies not only based on fundamentals but also based on path-dependencies (existing structures). (ii) With multiple equilibria, we may observe unstable outcomes and structural changes even in the absence of changes in fundamentals. |
| Seznam odborné literatury |
| Adrian Aycan Corum, Andrey Malenko and Nadya Malenko, 2023 , Corporate Governance in the Presence of Active and Passive Delegated Investment, European Corporate Governance Institute – Finance Working Paper 695/2020
Alon Brav, Matthew Cain, Jonathon Zytnick, 2022, Retail shareholder participation in the proxy process: Monitoring, engagement, and voting, Journal of Financial Economics,Volume 144, Issue 2, Pages 492-522. Alon Brav, Nadya Malenko and Andrey Malenko, 2022, Corporate Governance Implications of the Growth in Indexing, European Corporate Governance Institute – Finance Working Paper No. 849/2022. Christian Gollier and Sébastien Pouget, 2022, Investment Strategies and Corporate Behaviour with Socially Responsible Investors: A Theory of Active Ownership. Economica, 89: 997-1023. Doron Levit, Nadya Malenko and Ernst Maug, 2022, Trading and Shareholder Democracy Journal of Finance, Forthcoming. Also: European Corporate Governance Institute – Finance Working Paper No. 631/2019. Doron Levit, Nadya Malenko and Ernst Maug, 2021, The Voting Premium, CEPR Discussion Paper No. DP15718. Grant M. Hayden and Matthew T. Bodie, 2008, One share, one vote and the false promise of shareholder homogeneity, Cardozo Law Review 30, 445-505. Patrick Bolton, Tao Li, Enrichetta Ravina and Howard Rosenthal, 2020, Investor ideology, Journal of Financial Economics 137:2, 320-352. Ryan Bubb and Emiliano M. Catan, 2020, The Party Structure of Mutual Funds. European Corporate Governance Institute - Law Working Paper 560/2020. Sophia Zhengzi Li, Ernst Maug, and Miriam Schwartz-Ziv, 2022, When shareholders disagree: Trading after shareholder meetings, Review of Financial Studies 35:4, 1813-1867. |
| Předběžná náplň práce |
| Contribution
The main aim of the thesis is to further extend the already existing model of Levit, Malenko, Maug on Trading and Shareholder Democracy (2022, forthcoming in Journal of Finance) with the multi-dimensional preferences. The original model is essentially a single-dimensional policy preferences problem. I want to investigate how the existence of multiple dimensions of non-financial preferences will affect the self-fulfilling expectations and existence of multiple equilibria. I also seek to understand how equilibrium firms (i.e., equilibrium shareholders bases) look like and moreover I would like to examine the effect of dependency of preferences on the overall result. The secondary aim would be to specifically model the second dimension as the social concerns. As a real life policy may impose both positive and negative externality, this implementation will improve the ability to precisely investigate the effect of implementation of E&S policy. Methodology I use the already existing model of Levit, Maug, Malenko (2022) which is related to the theoretical literature on shareholder voting (e.g. Maug and Rydqvist 2009, Levit and Malenko 2011). There are two underlying literatures: One is governance through voice and exit and the second one is general equilibrium with incomplete markets. I will use standard equilibrium solution concepts. In addition, before the analysis of the full model with voting and trading under multidimensional preferences, I analyze two benchmark cases to better show the intuition, first in which shareholders vote but do not trade and the second where shareholders trade but do not vote. Outline Abstract Introduction Literature review Baseline models A single-dimensional model A multi-dimensional model Equilibrium Results Conclusion |
| Předběžná náplň práce v anglickém jazyce |
| Contribution
The main aim of the thesis is to further extend the already existing model of Levit, Malenko, Maug on Trading and Shareholder Democracy (2022, forthcoming in Journal of Finance) with the multi-dimensional preferences. The original model is essentially a single-dimensional policy preferences problem. I want to investigate how the existence of multiple dimensions of non-financial preferences will affect the self-fulfilling expectations and existence of multiple equilibria. I also seek to understand how equilibrium firms (i.e., equilibrium shareholders bases) look like and moreover I would like to examine the effect of dependency of preferences on the overall result. The secondary aim would be to specifically model the second dimension as the social concerns. As a real life policy may impose both positive and negative externality, this implementation will improve the ability to precisely investigate the effect of implementation of E&S policy. Methodology I use the already existing model of Levit, Maug, Malenko (2022) which is related to the theoretical literature on shareholder voting (e.g. Maug and Rydqvist 2009, Levit and Malenko 2011). There are two underlying literatures: One is governance through voice and exit and the second one is general equilibrium with incomplete markets. I will use standard equilibrium solution concepts. In addition, before the analysis of the full model with voting and trading under multidimensional preferences, I analyze two benchmark cases to better show the intuition, first in which shareholders vote but do not trade and the second where shareholders trade but do not vote. Outline Abstract Introduction Literature review Baseline models A single-dimensional model A multi-dimensional model Equilibrium Results Conclusion |