Shareholder Protection... Is it necessary?

12:30-13:00: Sandwich lunch

13:00-14:00: Presentation and Discussion

About the Discussion

The premise for protecting shareholders from dilution, loss of wealth and control through providing pre-emptive rights is that agents may not act in the interests of principals. Levels of protection differ by countries and regions. In the US, protection of share-holders has been weak on the grounds that capital formation takes precedent while recourse to litigation is presumed an adequate remedy to disputes. In Europe, arguably because of the closely held nature of many public companies and practice of lenders to as well hold equity, shareholder protection from dilution and loss of control has been stronger. Proponents of pre-emptive rights emphasize protecting the democratic nature of the limited liability corporation while opponents argue that professional management have greater insights regarding capital formation and growth opportunities. From a financial theory perspective, the argument for protection rests upon whether the cost of debt and of equity reflect capital structure as well as the potential for changes and hence capitalised into share prices. Applying financial theory and statistical analysis, we explore if shareholders need protection from dilution, or if the risks are already capitalised into share prices. Our findings and insights cast doubt on the benefits of protection and the legal basis for compensation.

About the Speaker

Dr Lawrence Haar is a Senior Lecturer in Finance with Brighton University School of Business and Law. Preceding his academic career, Dr Haar had a twenty-five-year career which included BP North America, Rand Mines in South Africa and the German energy group, RWE and major banks where he applied his knowledge of commodity markets to risk management. As a Risk Officer for commodities, he was a Director and Managing Director with the following institutions: Bear Stearns-JPM, Credit Suisse and UniCredit. He has as well worked in Saudi Arabia for ARAMCO and been a Director in Audit Assurance for Deloitte.

Through his peer-reviewed research, he regularly appears in academic journals, such as International Review of Financial Analysis, Risks, Energy Policy, Energy Strategy Review and publications of the Institute for Economic Affairs as well as the CATO Institute. He also appears in the financial press, including the Petroleum Economist. He was on the Editorial Board for the Journal Energy Policy and is presently an Editor for the journal Economic Affairs published by the Institute for Economic Affairs and Wiley. He has appeared numerous times on various BBC stations, France24, Capital FM and GBTV discussing energy markets and energy policies. He has a PhD in Financial Economics from the University of Surrey, a Masters from Brown University and a Bachelors from New York University.

About the Series

This will be the next instalment in our monthly Food for Thought series, hosted in partnership with the Vinson Centre at the University of Buckingham. The purpose of this series is to foster high-level academic discussion on themes within the classical liberal tradition, touching on economics, philosophy, history, law, and related disciplines. In turn, we hope to form a community of academics, policymakers, professionals, and students united by the exchange of ideas and life-long learning.