The Wall Street Walk when Blockholders Compete for Flows

64 Pages Posted: 23 May 2011 Last revised: 12 Mar 2015

See all articles by Amil Dasgupta

Amil Dasgupta

London School of Economics (LSE); European Corporate Governance Institute (ECGI)

Giorgia Piacentino

Columbia University

Date Written: December 2014


Effective monitoring by equity blockholders is important for good corporate governance. A prominent theoretical literature argues that the threat of block sale ("exit") can be an affective governance mechanism. Many blockholders are money managers. We show that when money managers compete for investor capital, the threat of exit loses credibility, weakening its governance role. Money managers with more skin in the game will govern more successfully using exit. Allowing funds to engage in activist measures ("voice") does not alter our qualitative results. Our results link widely prevalent incentives in the ever-expanding money management industry to the nature of corporate governance.

Keywords: Governance, Exit, Delegated Portfolio Management, Career Concerns

Suggested Citation

Dasgupta, Amil and Piacentino, Giorgia, The Wall Street Walk when Blockholders Compete for Flows (December 2014). Journal of Finance, Forthcoming, AFA 2013 San Diego Meetings Paper, European Corporate Governance Institute (ECGI) - Finance Working Paper No. 430/2014, Available at SSRN: or

Amil Dasgupta (Contact Author)

London School of Economics (LSE) ( email )

Houghton Street
London WC2A 2AE
United Kingdom
+44 20 7955 7458 (Phone)
+44 20 7955 7420 (Fax)

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels

Giorgia Piacentino

Columbia University ( email )

New York

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