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The Wall Street walk when blockholders compete for flows

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  • Dasgupta, Amil
  • Piacentino, Giorgia

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.

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  • Dasgupta, Amil & Piacentino, Giorgia, 2011. "The Wall Street walk when blockholders compete for flows," LSE Research Online Documents on Economics 119060, London School of Economics and Political Science, LSE Library.
    • Handle: RePEc:ehl:lserod:119060
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    File URL: http://eprints.lse.ac.uk/119060/
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    References listed on IDEAS

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    Cited by:

    1. Burkart, Mike & Dasgupta, Amil, 2014. "Activist funds, leverage, and procyclicality," LSE Research Online Documents on Economics 119029, London School of Economics and Political Science, LSE Library.

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    JEL classification:

    • G00 - Financial Economics - - General - - - General

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