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Large Shareholders and the Monitoring of Managers: The Case of Antitakeover Charter Amendments

Published online by Cambridge University Press:  06 April 2009

Anup Agrawal  and
Gershon N. Mandelker
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Abstract

This paper examines the role of large shareholders in monitoring managers when they propose antitakeover charter amendments. We attempt to distinguish between two competing hypotheses: the “active monitoring hypothesis” and the “passive voting hypothesis.” We find a statistically significant positive relation between institutional ownership and the stockholder wealth effects of various types of amendments, after controlling for ownership concentration among institutions, managerial ownership, and firm size. Our empirical evidence lends support to the “active monitoring hypothesis” proposed by Demsetz (1983) and Shleifer and Vishny (1986) that the existence of large shareholders leads to better monitoring of managers.

Type
Research Article
Information
Journal of Financial and Quantitative Analysis , Volume 25 , Issue 2 , June 1990 , pp. 143 - 161
Copyright
Copyright © School of Business Administration, University of Washington 1990

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