Shareholders Going Long and Short: Corporate Governance Under Threat?

Sergakis, K. (2016) Shareholders Going Long and Short: Corporate Governance Under Threat? SLS 2016 Annual Conference, University of Oxford, UK, 6-9 Sept 2016.

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A shareholder that combines long and short positions for risk-hedging purposes may distort corporate decision-making and weaken shareholder democracy by reinventing the shareholder status and transforming voting rights into a malleable instrument. This paper endeavours to challenge this canonical view by also examining a market efficiency perspective that favours such mixed long/short positions. By acknowledging that initiatives with a ‘value decreasing’ objective are not necessarily a feature of short-selling, since they may also derive from shareholders with exclusively long positions, the paper asserts that the arguments based on corporate governance concerns as an additional reason to set or strengthen short seller duties become therefore weaker. Our approach obviously cannot predict to what extent scandals may (or may not) erupt in the future since manipulative behaviour with a ‘risk-free’ allure cannot be ruled out. However, lacking substantial evidence for widespread manipulative transactions in the area of short selling, any further imposition of duties or restriction of rights (such as shareholder disenfranchisement) would be unduly burdensome and counter-productive. In fact, our paper argues that reforms should be directed towards fine-tuning existing duties.

Item Type:Conference or Workshop Item
Glasgow Author(s) Enlighten ID:UNSPECIFIED
Authors: Sergakis, K.
College/School:College of Social Sciences > School of Law
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