Exit as governance: do blockholders affect corporate innovation in large US firms?

Axel R. Helling, Benjamin Maury and Eva Liljeblom

Accounting and Finance, 2020, vol. 60, issue 2, 1703-1725

Abstract: Using a sample of large US firms, this study shows that blockholders in combination with liquidity can contribute positively to innovation (R&D investments). We contribute to the literature on managerial myopia that has focused mainly on large owners and their type (short‐term/long‐term). Our results are in line with recent theoretical studies arguing that blockholders in combination with market liquidity can mitigate managerial myopia, as suggested by the exit model of governance. The results indicate that blockholders can be efficient in resolving agency problems and that they can enhance long‐term prosperity, even when the individual blockholder investment horizon may not be long.

Date: 2020
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