Exit vs. Voice

50 Pages Posted: 28 Aug 2020

See all articles by Eleonora Broccardo

Eleonora Broccardo

University of Trento

Oliver Hart

Harvard University - Department of Economics; National Bureau of Economic Research (NBER); European Corporate Governance Institute (ECGI)

Luigi Zingales

University of Chicago - Booth School of Business; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)

Multiple version iconThere are 4 versions of this paper

Date Written: August 24, 2020

Abstract

We study the relative effectiveness of exit (divestment and boycott) and voice (engagement) strategies in promoting socially desirable outcomes in companies. We show that in a competitive world exit is less effective than voice in pushing firms to act in a socially responsible manner. Furthermore, we demonstrate that individual incentives to join an exit strategy are not necessarily aligned with social incentives, whereas they are when well-diversified investors are allowed to express their voice. We discuss what social and legal considerations might sometimes make exit preferable to voice.

Suggested Citation

Broccardo, Eleonora and Hart, Oliver D. and Zingales, Luigi, Exit vs. Voice (August 24, 2020). University of Chicago, Becker Friedman Institute for Economics Working Paper No. 2020-114, Available at SSRN: https://ssrn.com/abstract=3680815 or http://dx.doi.org/10.2139/ssrn.3680815

Eleonora Broccardo

University of Trento ( email )

Via Giuseppe Verdi 26
Trento, Trento 38152
Italy

Oliver D. Hart

Harvard University - Department of Economics ( email )

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Cambridge, MA 02138
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National Bureau of Economic Research (NBER) ( email )

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European Corporate Governance Institute (ECGI) ( email )

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Luigi Zingales (Contact Author)

University of Chicago - Booth School of Business ( email )

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773-702-3196 (Phone)
773-834-2081 (Fax)

National Bureau of Economic Research (NBER)

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United States

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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