We study governance when shareholders vote and can also buy or sell shares. We find that voting for the policy that one believes is better for the firm maximizes portfolio value only when pivotal; otherwise, it is better to vote against one’s information, distort the market, and then trade at the distorted price. Equilibrium voting informativeness balances these forces and is demonstrably low. As the number of shareholders grows, the probability of making the correct decision becomes lower than the informational quality of just one shareholder’s private signal. Despite this, shareholders extract information rents from trading and thus obtain additional value from their private information. These effects are related to the level of direct information leakage in the market. The predicted patterns of trading and market volatility help reconcile several debates.

Engagement in a destructive war can be understood as the “punishment” for entering into a dispute. Institutions that reduce the chance that disputes lead to war make this punishment less severe. This may incentivize hawkish policies like militarization and potentially offset the benefits of peace brokering. We study a model in which unmediated peace talks are effective at improving the peace chance for given militarization but lead to more militarization and ultimately to a higher incidence of war. Instead, a form of third-party mediation inspired by work of Myerson effectively brokers peace in emerged disputes and also minimizes equilibrium militarization.