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Lookup NU author(s): Professor Mich Tvede
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In the present paper we study voting-based corporate control in a general equilibrium model with incomplete financial markets. Since voting takes place in a multi-dimensional setting, super-majority rules are needed to ensure existence of equilibrium. In a linear-quadratic setup we show that the endogenization of voting weights (given by portfolio holdings) can give rise to - through self-fulfilling expectations - dramatical political instability, i.e. Condorcet cycles of length two even for very high majority rules.
Author(s): Cres H, Tvede M
Publication type: Article
Publication status: Published
Journal: Journal of Mathematical Economics
Year: 2009
Volume: 45
Issue: 3-4
Pages: 212-222
ISSN (print): 0304-4068
ISSN (electronic): 1873-1538
Publisher: Elsevier BV
URL: http://dx.doi.org/10.1016/j.jmateco.2008.09.005
DOI: 10.1016/j.jmateco.2008.09.005
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