The missing role of controlling shareholders in the short-termism debate

The missing role of controlling shareholders in the short-termism debate

Tom Vos

Series number :

Serial Number: 
728/2023

Date posted :

August 01 2023

Last revised :

August 01 2023
SSRN Share

Keywords

  • short-termism • 
  • controlling shareholders • 
  • agency problems • 
  • private benefits of control • 
  • family firms • 
  • loyalty voting rights

Corporate short-termism, i.e., corporations sacrificing long-term value for short-term profits, has received a lot of attention in the corporate governance literature. However, the role of controlling shareholders in the short-termism debate has remained understudied, possibly because of a focus on US and UK governance systems.

This paper addresses this by comprehensively analyzing the impact of controlling shareholders on the short-termism problem. Two conceptual models of short-termism are presented, one where short-termism originates with asset managers and institutional investors, and one where it originates with managers and directors. The paper then shows how controlling shareholders can eliminate short-termism in both models, but only if controlling shareholders themselves are not excessively short-term oriented, which depends on the type of controlling shareholder. The paper concludes with some policy implications, including with regards to loyalty voting rights and dual class share structures.

 

 

 

Authors

Mr.
Real name:
Tom Vos
Jean-Pierre Blumberg Chair, University of Antwerp