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Effective monitoring by equity blockholders is important for good corporate governance. A prominent theoretical literature argues that the threat of block sale ("exit") can be an affective governance mechanism. Many blockholders are money managers. We show that when money managers compete for investor capital, the threat of exit loses credibility, weakening its governance role.
Money managers with more skin in the game will govern more successfully using exit. Allowing funds to engage in activist measures ("voice") does not alter our qualitative results. Our results link widely prevalent incentives in the ever-expanding money management industry to the nature of corporate governance.
This paper develops a theory of blockholder governance and the voting premium. A blockholder and dispersed shareholders first trade in a competitive...
In this contribution, we focus on the market for stewardship, as this has been developing in the UK. We observe that the 2020 UK Stewardship Code more...