The Wall Street Walk when Blockholders Compete for Flows
Publicly traded corporations are a¤ected by a core agency problem: managers pay the full cost of e¤ort in running the corporations but shareholders enjoy most of the bene?ts. When ownership is dispersed individual shareholders have little incentive to monitor managers and little ability to in?uence them. Holders of equity blocks (?blockholders?) are a natural solu- tion to this problem. Because they own many shares they have both the incentive to monitor and the ability to in?uence management. Several well-known papers (e.g. Grossman and Hart (1980), Shleifer and Vishny (1986), Admati, P?eiderer, and Zechner (1994) and Kahn and Winton (1998)) have shown that blockholders can increase ?rm value through monitoring and activism. Activism can take the form of bringing forth shareholder proposals, proxy voting against management, informal negotiations with management, jawboning etc. These activities are collectively referred to as the use of ?voice?by blockholders.
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- Admati, Anat R & Pfleiderer, Paul & Zechner, Josef, 1994.
"Large Shareholder Activism, Risk Sharing, and Financial Market Equilibrium,"
Journal of Political Economy,
University of Chicago Press, vol. 102(6), pages 1097-1130, December.
- A. Admati & P. Pßeiderer & J. Zechner, 2005. "Large shareholder activism, risk sharing, and financial market equilibrium," Public Economics 0502011, EconWPA.
- Alex Edmans & Gustavo Manso, 2011. "Governance Through Trading and Intervention: A Theory of Multiple Blockholders," Review of Financial Studies, Society for Financial Studies, vol. 24(7), pages 2395-2428.
- Veronica Guerrieri & Péter Kondor, 2009.
"Fund Managers, Career Concerns, and Asset Price Volatility,"
NBER Working Papers
14898, National Bureau of Economic Research, Inc.
- Veronica Guerrieri & Peter Kondor, 2012. "Fund Managers, Career Concerns, and Asset Price Volatility," American Economic Review, American Economic Association, vol. 102(5), pages 1986-2017, August.
- Veronica Guerrieri & Peter Kondor, 2010. "Fund managers, career concerns, and asset price volatility," Staff Report 446, Federal Reserve Bank of Minneapolis.
- Guerrieri, Veronica & Kondor, Péter, 2011. "Fund Managers, Career Concerns, and Asset Price Volatility," CEPR Discussion Papers 8454, C.E.P.R. Discussion Papers.
- Alex Edmans, 2009. "Blockholder Trading, Market Efficiency, and Managerial Myopia," Journal of Finance, American Finance Association, vol. 64(6), pages 2481-2513, December.
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