The 'Wall Street Walk' and Shareholder Activism: Exit as a Form of Voice
Review of Financial Studies, Forthcoming
Stanford Graduate School of Business Research Paper No. 1918(R2)
46 Pages Posted: 21 Sep 2007 Last revised: 11 Feb 2009
There are 2 versions of this paper
The 'Wall Street Walk' and Shareholder Activism: Exit as a Form of Voice
The 'Wall Street Walk' and Shareholder Activism: Exit as a Form of Voice
Abstract
We examine whether a large shareholder can alleviate conflicts of interest between managers and shareholders through the credible threat of exit on the basis of private information. In our model, the threat of exit often reduces agency costs, but additional private information need not enhance the effectiveness of the mechanism. Moreover, the threat of exit can produce quite different effects depending on whether the agency problem involves desirable or undesirable actions from shareholders' perspective. Our results are consistent with empirical findings on the interaction between managers and minority large shareholders and have further empirical implications.
Keywords: shareholder activism, exit, agency, Corporate Governance, monitoring, manager-shareholders conflict, mutual funds
JEL Classification: G34, G32, D82
Suggested Citation: Suggested Citation
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