Abstract

http://ssrn.com/abstract=1572940
 
 

References (38)



 
 

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Exit as Governance: An Empirical Analysis


Sreedhar T. Bharath


Arizona State University - W.P. Carey School of Business

Sudarshan Jayaraman


Washington University in Saint Louis - John M. Olin Business School

Venky Nagar


University of Michigan, Stephen M. Ross School of Business

March 16, 2010

Journal of Finance, Forthcoming

Abstract:     
Recent theory posits a new governance channel available to blockholders: threat of exit. The threat of exit, as opposed to actual exit, is difficult to measure directly. However, a crucial property is that the threat of exit is weaker when stock liquidity is lower and vice versa. We use natural experiments of financial crises and decimalization as exogenous shocks to stock liquidity. Firms with larger blockholdings experience greater declines in firm value during these crises periods (and increases during decimalization), particularly if the manager’s wealth is more sensitive to the stock price and thus to the threat of exit. Additional tests suggest exit threats are distinct from blockholder intervention.

Number of Pages in PDF File: 60

Keywords: Liquidity, Governance, Natural Experiment, Exit,Decimalization, Russian Crisis, Asian Crisis

JEL Classification: G30,G34

Accepted Paper Series


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Date posted: March 25, 2010 ; Last revised: June 18, 2012

Suggested Citation

Bharath, Sreedhar T. and Jayaraman, Sudarshan and Nagar, Venky, Exit as Governance: An Empirical Analysis (March 16, 2010). Journal of Finance, Forthcoming. Available at SSRN: http://ssrn.com/abstract=1572940 or http://dx.doi.org/10.2139/ssrn.1572940

Contact Information

Sreedhar T. Bharath (Contact Author)
Arizona State University - W.P. Carey School of Business ( email )
400 E. Lemon Street
Tempe, AZ 85287
United States
347-256-8784 (Phone)
Sudarshan Jayaraman
Washington University in Saint Louis - John M. Olin Business School ( email )
One Brookings Drive
Campus Box 1133
St. Louis, MO 63130-4899
United States
Venky Nagar
University of Michigan, Stephen M. Ross School of Business ( email )
701 Tappan Street
Ann Arbor, MI MI 48109
United States
734-647-3292 (Phone)
734-764-3146 (Fax)
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