The Wall Street stampede: exit as governance with interacting blockholders

Cvijanovic, Dragana, Dasgupta, Amil ORCID: 0000-0001-8474-9470 and Zachariadis, Konstantinos (2021) The Wall Street stampede: exit as governance with interacting blockholders. Financial Markets Group Discussion Papers (841). Financial Markets Group, The London School of Economics and Political Science, London, UK.

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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 large-sample evidence consistent with our model.

Item Type:	Monograph (Discussion Paper)
Official URL:	https://www.fmg.ac.uk/
Additional Information:	© 2021 The Authors
Divisions:	Finance
Subjects:	H Social Sciences > HG Finance H Social Sciences > HC Economic History and Conditions
JEL classification:	G - Financial Economics > G2 - Financial Institutions and Services > G23 - Pension Funds; Other Private Financial Institutions G - Financial Economics > G3 - Corporate Finance and Governance > G34 - Mergers; Acquisitions; Restructuring; Corporate Governance
Date Deposited:	18 May 2023 07:45
Last Modified:	15 Sep 2023 23:59
URI:	http://eprints.lse.ac.uk/id/eprint/118846

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