Portal de Periódicos da CAPES

The “Wall Street Walk” and Shareholder Activism: Exit as a Form of Voice

2009; Oxford University Press; Volume: 22; Issue: 7 Linguagem: Inglês

10.1093/rfs/hhp037

1465-7368

Anat R. Admati, Paul Pfleiderer,

Private Equity and Venture Capital

We examine whether a large shareholder can alleviate conflicts of interest between managers and shareholders through the credible threat of exit on the basis of private information. In our model, the threat of exit often reduces agency costs, but additional private information need not enhance the effectiveness of the mechanism. Moreover, the threat of exit can produce quite different effects depending on whether the agency problem involves desirable or undesirable actions from shareholders' perspective. Our results are consistent with empirical findings on the interaction between managers and minority large shareholders and have further empirical implications.