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Production externalities: internalization by voting

Abstract : We study internalization of production externalities in perfectly competitive markets where production plans are decided by majority voting. Since shareholders want firms to maximize dividends of portfolios rather than profits, they are interested in some internalization. Two governances, namely the shareholder governance (one share, one vote) and the stakeholder democracy (one stakeholder, one vote), are compared. We argue that perfect internalization is more likely to be the outcome of the stakeholder democracy than the shareholder governance.
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Submitted on : Thursday, April 3, 2014 - 8:12:28 PM
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Hervé Crès, Mich Tvede. Production externalities: internalization by voting. 2011. ⟨hal-00972983⟩

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