Exit vs. Voice

Luigi Zingales, Eleonora Broccardo and Oliver Hart

No 15176, CEPR Discussion Papers from C.E.P.R. Discussion Papers

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.

Keywords: Exit; voice; Social responsibility; Divestment; Boycott; Engagement (search for similar items in EconPapers)
JEL-codes: D02 D21 D23 D62 D64 H41 L21 (search for similar items in EconPapers)
Date: 2020-08
New Economics Papers: this item is included in nep-mic
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Citations: View citations in EconPapers (5)

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Working Paper: Exit vs. Voice (2020)
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