The Wall Street walk when blockholders compete for flows

Amil Dasgupta and Giorgia Piacentino

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

Abstract: An important recent theoretical literature argues that the threat of exit can represent an effective form of governance when the blockholder is a principal. However, a significant fraction of equity blocks is held by delegated portfolio managers. How do agency frictions arising from the delegation of portfolio management affect the ability of blockholders to govern via the threat of exit? We show that when blockholders are sufficiently career concerned exit will fail as a disciplining device. Our results have testable implications on the relative degree to which different classes of delegated portfolio managers use exit as a form of governance.

JEL-codes: G00 (search for similar items in EconPapers)
Pages: 41 pages
Date: 2011-10-01
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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