Large Shareholders and Market Discipline in a Regulated Industry: A Clinical Study of Mellon Bank
The change in control at Mellon Bank in 1987 sheds a unique light on several aspects of corporate control, because Mellon was one of only a few banks with a large shareholder. We find that the large shareholder did not monitor the firm extensively before it experienced performance difficulties, but was able to enforce a management change when problems arose. Contrary to some theoretical models, the shareholder did not have to acquire a majority stake to effect the change. Mellon’s rapid recovery relative to peer banks’ reveals the inability of regulatory intervention to substitute fully for market-based forms of corporate control.
Suggested citation: Haubrich, Joseph and James Thomson, 1998. “Large Shareholders and Market Discipline in a Regulated Industry: A Clinical Study of Mellon Bank,” Federal Reserve Bank of Cleveland, Working Paper, no. 98-03.