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Working Paper

Large Shareholders and Market Discipline in a Regulated Industry: A Clinical Study of Mellon Bank

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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.
02.01.1998ISSN 2573-7953 WP 98-03DOI 10.26509/frbc-wp-199803

Working Papers of the Federal Reserve Bank of Cleveland are preliminary materials circulated to stimulate discussion and critical comment on research in progress. They may not have been subject to the formal editorial review accorded official Federal Reserve Bank of Cleveland publications. The views expressed in this paper are those of the authors and do not represent the views of the Federal Reserve Bank of Cleveland or the Federal Reserve System.

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