The Effect of Check-and-balance Ownership Structure on Agency Problems: A Theoretical Model

摘要

Type I and type II agency problems more or less exist in modern corporations. The former arises from the conflicting interests between managers and shareholders, while the latter results from the inconsistent benefits between blockholders and minority ones. Does a check-and-balance ownership structure contribute to the solution of agency problems? In this paper, we find that the answer depends on the fraction of shares held by the largest shareholders because the multiple large shareholders have different effects on the two types of agency problems. When the share is lower, a check-and-balance ownership structure may exacerbate agency problems due to the coalition effect, and vice versa owing to the monitoring effect. Thus there will be a balance point where a check-and-balance ownership structure may have no significant influence on agency problems.