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The wall street stampede: exit as governance with interacting blockholders

Cvijanović, Dragana, Dasgupta, Amil and Zachariadis, Konstantinos (2022) The wall street stampede: exit as governance with interacting blockholders. Journal of Financial Economics, 144 (2). pp. 433-455. ISSN 0304-405X

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Identification Number: 10.1016/j.jfineco.2022.02.005

Abstract

The growth of the asset management industry has made it commonplace for firms to have multiple institutional blockholders. In such firms, the strength of governance via exit depends on how blockholders react to each other's exit. We present a model to show that open-ended institutional investors such as mutual funds react strongly to an informed blockholder's exit, leading to correlated exits that enhance corporate governance. Our analysis points to a new role for mutual funds in corporate governance. We examine the trades of mutual funds around exits by activist hedge funds to present empirical evidence consistent with our model.

Item Type: Article
Official URL: https://www.journals.elsevier.com/journal-of-finan...
Additional Information: © 2022 The Author(s).
Divisions: Finance
Subjects: H Social Sciences > HG Finance
H Social Sciences > HB Economic Theory
JEL classification: G - Financial Economics > G2 - Financial Institutions and Services > G23 - Pension Funds; Other Private Financial Institutions
G - Financial Economics > G2 - Financial Institutions and Services > G24 - Investment Banking; Venture Capital; Brokerage; Rating Agencies
Date Deposited: 10 Feb 2022 13:42
Last Modified: 20 Jun 2022 09:42
URI: http://eprints.lse.ac.uk/id/eprint/113710

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