Abstract: Using decentralized autonomous organizations (DAOs) as a novel laboratory, I study whether shareholder democracy improves firms' decision making when shareholders conflict. I first find that minority disengagement is ubiquitous. I then identify vote-level patterns synonymous with conflictual proposals, on which shareholder democracy could precisely prove its effectiveness if it were to not destroy value. I find, however, that the first time a large shareholder sways a proposal against minority participants is a signal to them that shareholder democracy is ineffective. These votes trigger large declines in abnormal returns (-12.8% weekly CARs) and further voting-power concentration and minority disengagement. A model rationalizes these findings by showing how controlling shareholders trade off private benefit extraction against market perceptions of their type, and how shareholder democracy is most likely to be ineffective against controlling shareholders when ownership is most dispersed.

Abstract: This paper studies the financial policy of stablecoin issuers: how they are funded and how they distribute reserves. We document that issuers with similar business activities may adopt similar policies (MakerDAO and Aave) or very different ones (Tether and Circle). We rationalize this pattern with a model in which the return earned on reserves is a fundamental characteristic that differs between on-chain and off-chain issuers. The higher return available to off-chain issuers exacerbates agency frictions and, in turn, shapes optimal financial policy. We show that the resulting effect is non-monotone in observable outcomes: a higher return can lead to concentrated insider ownership and flexible, aggressive payouts, but it can also lead to dispersed equity ownership and rigid, conservative policies. We close with novel evidence that the implementation of on-chain buyback programs is subject to important frictions.

Abstract: While corporate governance theory predicts substantial voter-level heterogeneity in the willingness to pay for voting rights, empirical evidence has remained scarce due to data limitations and limited governance proposal heterogeneity in traditional finance. We use the new laboratory that is the governance of Decentralized Finance platforms where governance proposals are high-frequency and span a wide set of subjects to analyze over individual 230,000 votes and bring new supporting evidence of how voters' preferences shape their willingness to pay for voting rights. Voters opposing the prevailing outcome are willing to pay significantly more for voting power, with large variations across proposal subjects. Through a novel vote-level measure of the probability of being pivotal, we confirm untested recent corporate governance theory predictions that increasing pivotality fundamentally reshapes how preferences are valued, amplifying, attenuating, and even reversing average effects on the willingness to pay for voting rights. At the proposal level, we recover established corporate governance results to further validate our new laboratory. 

Abstract: We develop a dynamic principal-agent model of tokenized governance, where dispersed tokenholders delegate control rights to specialized representatives. As these voting delegates build reputation through governance participation, we show that although blockchain transparency could reduce agency costs, anonymity of voting delegates actually amplifies them. Malicious delegates exert more early effort compared with honest delegates as effort helps them grow both their continuation value and their expected gains from misconduct. Since anonymity allows them to reset their identities, reputation provides limited discipline. Observing delegate effort, platform growth and choice of not attacking the platform, tokenholders rationally reduce their monitoring. Lower oversight reduces delegates' expected tenure which in turn relatively increases expected gains of opportunism, possibly generating governance failures, token price declines, and delegate turnover.