Exit as Governance: An Empirical Analysis

Recent theory posits a new governance channel available to blockholders: threat of exit. Threat of exit, as opposed to actual exit, is difficult to measure directly. However, a crucial property is that it is weaker when stock liquidity is lower and vice versa. We use natural experiments of financial...

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Veröffentlicht in:	The Journal of finance (New York) 2013-12, Vol.68 (6), p.2515-2547
Hauptverfasser:	BHARATH, SREEDHAR T., JAYARAMAN, SUDARSHAN, NAGAR, VENKY
Format:	Artikel
Sprache:	eng
Schlagworte:	Corporate governance Economic crises Economic crisis Economic models Empirical research Financial crisis Financial economics Firm value Governance Government crises International liquidity Investment strategies Investors Liquidity Market exit P values Property Shareholders wealth Stock prices Stockholders Studies Wealth
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container_end_page	2547
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container_title	The Journal of finance (New York)
container_volume	68
creator	BHARATH, SREEDHAR T. JAYARAMAN, SUDARSHAN NAGAR, VENKY
description	Recent theory posits a new governance channel available to blockholders: threat of exit. Threat of exit, as opposed to actual exit, is difficult to measure directly. However, a crucial property is that it is weaker when stock liquidity is lower and vice versa. We use natural experiments of financial crises and decimalization as exogenous shocks to stock liquidity. Firms with larger blockholdings experience greater declines (increases) in firm value during the crises (decimalization), particularly if the manager's wealth is sensitive to the stock price and thus to exit threats. Additional tests suggest exit threats are distinct from blockholder intervention.
doi_str_mv	10.1111/jofi.12073
format	Article
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source	Jstor Complete Legacy; Wiley Online Library Journals Frontfile Complete
subjects	Corporate governance Economic crises Economic crisis Economic models Empirical research Financial crisis Financial economics Firm value Governance Government crises International liquidity Investment strategies Investors Liquidity Market exit P values Property Shareholders wealth Stock prices Stockholders Studies Wealth
title	Exit as Governance: An Empirical Analysis
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