Posted by Jesse M. Fried (Harvard Law School), on Thursday, October 25, 2018
Editor's Note: Jesse Fried is the Dane Professor of Law at Harvard Law School. This post is based on his recent paper. Related research from the Program on Corporate Governance includes Cheap-Stock Tunneling Around Preemptive Rights by Prof. Fried and Holger Spamann (discussed on the Forum here).
In a paper recently posted on SSRN, Powering Preemptive Rights with Presubscription Disclosure, I put forward a proposal to make preemptive rights more effective: requiring the controller of a firm to disclose its subscription decision before outside investors decide their own.
Most corporations around the world have a controller: control is concentrated in the hands of either a single shareholder or a small group of shareholders acting in concert. Almost every unlisted (private) firm is a controlled firm. And many listed firms in the U.S. and most listed firms outside the U.S.—in Europe, Asia, and South America—are controlled firms.
