Exit vs. Voice

Eleonora Broccardo (), Oliver Hart () and Luigi Zingales
Additional contact information
Eleonora Broccardo: University of Trento
Oliver Hart: Harvard University - Department of Economics; NBER

No 2020-114, Working Papers from Becker Friedman Institute for Research In Economics

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.

JEL-codes: D02 D21 D23 D62 D64 H41 L21 (search for similar items in EconPapers)
Pages: 49 pages
Date: 2020
New Economics Papers: this item is included in nep-mic
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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Working Paper: Exit vs. Voice (2020)
Working Paper: Exit vs. Voice (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:bfi:wpaper:2020-114

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