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Working Paper

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 G., and James B. 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. https://doi.org/10.26509/frbc-wp-199803