Secrecy, collusion and coalition building in corporate governance

Abstract

This paper studies secrecy in voting and the role of information on coalition building in corporate governance. It finds evidence that supports the coalition building hypothesis and, in part, rejects the agency cost hypothesis. The conditions for insiders and large outsiders to form coalitions are examined. The results are consistent with insiders and large outsiders cooperating and voting as a block to maintain power, this imposes costs on other shareholders. Consistent with the agency theory and the coalition building theory, management initiated amendments have a more negative impact than shareholder initiated amendments. The Vote Your Conscience theory is rejected.