Posted: 22 Jun 2009
Date Written: July 2009
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: D53, D82, G10, G30, G34
Suggested Citation: Suggested Citation
Admati, Anat R. and Pfleiderer, Paul C., The 'Wall Street Walk' and Shareholder Activism: Exit as a Form of Voice (July 2009). The Review of Financial Studies, Vol. 22, Issue 7, pp. 2445-2485, 2009. Available at SSRN: https://ssrn.com/abstract=1422416 or http://dx.doi.org/hhp037