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Managers siding with insiders expropriation of

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Unformatted text preview: Entrenchment Problem: Insiders have large voting rights, but not much cash flow claim. Managers siding with insiders = expropriation of minority shareholders for own good (rent extraction) Australia: Called outsider, but seems insider. Large blockholders, mainly families. 45% companies have 10%+ shareholder. Institutional investors powerless. Weak market for corporate control. Rent extraction. Weakness in securities regulation. Europe: Mostly insider. Controlled by large families and banks. US: Outsider. Controlled by a large amount of anonymous and small investors. Week 8: Executive Compensation • • • • • • • • • Optimal Contracting Theory: Compensation reasonable...
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