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Large shareholders, monitoring, and the value of the firm

Burkart, Mike ORCID: 0000-0002-0954-4499, Gromb, Denis and Panunzi, Fausto (1997) Large shareholders, monitoring, and the value of the firm. Quarterly Journal of Economics, 112 (3). pp. 693-728. ISSN 0033-5533

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Identification Number: 10.1162/003355397555325


We propose that dispersed outside ownership and the resulting managerial discretion come with costs but also with benefits. Even when tight control by shareholders is ex post efficient, it constitutes ex ante an expropriation threat that reduces managerial initiative and noncontractible investments. In addition, we show that equity implements state contingent control, a feature usually associated with debt. Finally, we demonstrate that monitoring, and hence ownership concentration, may conflict with performance-based incentive schemes.

Item Type: Article
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Additional Information: © 1997 the President and Fellows of Harvard College and The Massachusetts Institute of Technology
Divisions: Finance
Subjects: H Social Sciences > HG Finance
Date Deposited: 22 Feb 2017 10:47
Last Modified: 20 Oct 2021 01:33

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