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The Wall Street Walk when Blockholders Compete for FlowsAmil DasguptaLondon School of Economics (LSE); Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI) Giorgia PiacentinoWashington University in Saint Louis - John M. Olin Business School December 2014 Journal of Finance, Forthcoming AFA 2013 San Diego Meetings Paper European Corporate Governance Institute (ECGI) - Finance Working Paper No. 430/2014 Abstract: 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.
Number of Pages in PDF File: 64 Keywords: Governance, Exit, Delegated Portfolio Management, Career Concerns Date posted: May 23, 2011 ; Last revised: March 12, 2015Suggested CitationContact Information
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