Ownership structure, Voting, and Risk

A Dhillon, and Silvia Rossetto


We analyze the determinants of a firm's ownership structure when decisions over risk are taken by majority vote of risk-averse shareholders. We show that when a fraction of small, diversified shareholders abstains from voting, mid-sized blockholders may emerge to mitigate the conflict of interests between one large shareholder, who prefers less risky investments, and these small, non-voting shareholders. The paper offers a novel explanation for the puzzling observation that many firms have multiple blockholders. The paper develops numerous empirical implications, for example on the link between ownership structure and risk choices and on the relative size of blocks.

JEL codes

  • G11: Portfolio Choice • Investment Decisions
  • G32: Financing Policy • Financial Risk and Risk Management • Capital and Ownership Structure • Value of Firms • Goodwill
  • G34: Mergers • Acquisitions • Restructuring • Corporate Governance


A Dhillon, and Silvia Rossetto, Ownership structure, Voting, and Risk, The Review of Financial Studies, February 2015, pp. 521–560.

See also

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The Review of Financial Studies, February 2015, pp. 521–560