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Corporate Ownership and ControlBritish Business Transformed$
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Brian R. Cheffins

Print publication date: 2008

Print ISBN-13: 9780199236978

Published to Oxford Scholarship Online: January 2009

DOI: 10.1093/acprof:oso/9780199236978.001.0001

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The ‘Buy Side’

The ‘Buy Side’

(p.86) FOUR The ‘Buy Side’
Corporate Ownership and Control

Brian R. Cheffins

Oxford University Press

This chapter describes why UK investors bought shares in sufficient volume for control to unwind, and explains why the new shareholders refrained from taking a ‘hands on’ role. Despite deterrents such as blockholders potentially extracting private benefits of control and Britain's 20th century economic ‘decline’, there was meaningful demand for shares, initially from individuals investing on their own behalf and later from institutional investors. Factors underpinning the demand for shares included the accumulation of substantial spare capital available for investment, ‘quality control’ by intermediaries organizing public offerings, information ‘signalling’ from dividend policy, the performance of shares relative to investment alternatives, and periodic waves of investor optimism. When private investors dominated the buy side they rarely took a ‘hands on’ approach with companies, largely due to collective action problems, diversified investment portfolios, and legal rules favouring boardroom incumbents.

Keywords:   private investors, institutional shareholders, voluntary corporate disclosure, managerial quality, business reputation, dividends, investor sentiment, mergers, company law, shareholder voting

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