Soft Shareholder Activism
University of Pennsylvania - Finance Department
This paper studies informal communications (voice) and exit as alternative ways through which shareholders can influence managers when obtaining control is not feasible or too costly. By focusing on the interaction between financial markets and the incentives of activist investors to communicate with managers, the analysis relates the effectiveness of voice and exit to market liquidity; entrenchment and compensation structure of managers; and expertise, liquidity and ownership size of activist investors. Importantly, I characterize the circumstances under which activist investors prefer to voice themselves publicly rather than engaging with managers behind the scenes.
Number of Pages in PDF File: 58
Keywords: Shareholder Activism, Voice, Exit, Corporate Governance, Communication, Transparency, Cheap-Talk
JEL Classification: D74, D82, D83, G34working papers series
Date posted: December 8, 2011 ; Last revised: October 26, 2013
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