Abstract: Using Decentralized Autonomous Organizations (DAOs) as a laboratory, I study the trade-off involved in adopting shareholder democracy. The benefit is that shareholders' preferences can be aggregated on decisions otherwise delegated to management, which I show shareholders value. The cost stems from minority shareholders disengaging amid frequent governance solicitation, amplifying large shareholders' voting power. Vote-level evidence suggests these large shareholders use this voting power to unilaterally impose outcomes. The first time they do so signals a breakdown in minority shareholders’ preferences aggregation, reduces token prices and subsequent minority turnout. I rationalize these empirical findings in a model where large shareholders' voting behavior signals their type. Structurally estimating this model suggests that large blockholders extract private-benefits.

Abstract: While shareholder voting theory predicts substantial voter-level heterogeneity in the willingness to pay for voting rights, empirical evidence of such heterogeneity has remained scarce due to data limitations and limited governance proposal scope 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 analyse over individual 230,000 votes and bring new supporting evidence of how voters' heterogeneity in 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 recent shareholder voting theory predictions that increasing a voter's pivotality can fundamentally reshape (amplify or attenuate) how its characteristics affect its willingness to pay for voting rights. At the proposal level, we recover established corporate governance results to further validate our new laboratory.

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: Tokenization and vote delegation are often viewed as mechanisms that improve platform building. We show that they can instead create inefficiencies when delegates strategically respond to endogenous changes in the governance environment. We develop a dynamic principal-agent model of decentralized governance in which tokenholders delegate control rights to self-promoting representatives whose types are initially unknown. In equilibrium, bad delegates exert high effort early on to build reputation, expand the platform, and thereby increase future gains from platform extraction. Observing effort and growth, tokenholders rationally reduce monitoring, increasing delegates' returns from opportunism and making platform failures most likely after periods of apparent success.