The Wall Street stampede: exit as governance with interacting blockholders

Dragana Cvijanovic, Amil Dasgupta and Konstantinos Zachariadis

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

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.

Keywords: institutional investors; competition for flow; exit governance; correlated trading (search for similar items in EconPapers)
JEL-codes: G23 G34 (search for similar items in EconPapers)
Pages: 61 pages
Date: 2021-07-30
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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http://eprints.lse.ac.uk/118846/ Open access version. (application/pdf)

Related works:
Journal Article: The Wall Street stampede: Exit as governance with interacting blockholders (2022)
Working Paper: The wall street stampede: exit as governance with interacting blockholders (2022)
Working Paper: The Wall Street Stampede: Exit as Governance with Interacting Blockholders (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:118846

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