Multiple large shareholders in corporate governance

Large shareholders of firms with majority bIocks are often at the heIm of their companies and do not necessarily have the same interests as minority shareholders. We show that bargaining problems Ied by the presence of muItipIe controlling shareholders protect minority shareholders. The same bargaining problems, however, prevent efficient decisions. By solving this trade-off we find that i) muItipIe controlling shareholders should be present in firms with Iarge costs of diIuting minority shareholders and in firms with Iarge financing requirements, ii) an optimal ownership structure requires the presence of a dass of shareholders - the minority shareholders - with no control over corporate decisions. Evidence on the ownership structure of dose corporations in the V.S. is consistent with our model.