We analyze the strengths and weaknesses of stakeholder and shareholder firms in a model of imperfect competition. Stakeholder firms are more concerned with avoiding bankruptcy to protect their employees and suppliers. In equilibrium, they are more valuable than shareholder firms when marginal cost uncertainty exceeds demand uncertainty. With globalization shareholder firms and stakeholder firms often compete. We identify the circumstances where stakeholder firms are more valuable than shareholder firms and compare these mixed equilibria with the pure equilibria with stakeholder and shareholder firms only. Finally, we analyze firm financial constraints and derive implications for the capital structure of stakeholder firms.

Corners were prevalent in the nineteenth and early twentieth century. We first develop a rational expectations model of corners and show that they can arise as the result of rational behavior. Then, using a novel hand-collected data set, we investigate price and trading behavior around several well-known stock market and commodity corners which occurred between 1863 and 1980. We find strong evidence that large investors and corporate insiders possess market power that allows them to manipulate prices. Manipulation leading to a market corner tends to increase market volatility and has an adverse price impact on other assets. We also find that the presence of large investors makes it risky for would-be short sellers to trade against the mispricing. Therefore, regulators and exchanges need to be concerned about ensuring that corners do not take place since they are accompanied by severe price distortions.

Franklin Allen, Hans Gersbach, Jan-Pieter Krahnen, Anthony M. Santomero; Competition Among Banks: Introduction and Conference Overview, European Finance Re