Blockholder Trading, Market Efficiency, and Managerial Myopia

@article{Edmans2009BlockholderTM,
  title={Blockholder Trading, Market Efficiency, and Managerial Myopia},
  author={Alex Edmans},
  journal={Journal of Finance},
  year={2009},
  volume={64},
  pages={2481-2513}
}
  • Alex Edmans
  • Published 2009
  • Economics
  • Journal of Finance
  • This paper analyzes how blockholders can exert governance even if they cannot intervene in a firm's operations. Blockholders have strong incentives to monitor the firm's fundamental value because they can sell their stakes upon negative information. By trading on private information (following the “Wall Street Rule”), they cause prices to reflect fundamental value rather than current earnings. This in turn encourages managers to invest for long‐run growth rather than short‐term profits… CONTINUE READING
    772 Citations

    Figures from this paper

    Dynamic Blockholder Incentives: Liquidity and Reputation
    • PDF
    Strategic Trading and Blockholder Ownership: Implications for IPO Design
    • PDF
    Liquidity and Shareholder Activism
    • 114
    • PDF
    Passive Blockholders, Informational Efficiency of Prices, and Firm Value
    • Highly Influenced
    Do Capital Markets Punish Managerial Myopia?
    • 1
    • Highly Influenced
    • PDF
    Compensation Duration, Shareholder Governance, and Managerial Short-Termism
    • 1
    • Highly Influenced
    • PDF
    Blockholders and Corporate Governance
    • 235
    • PDF

    References

    SHOWING 1-10 OF 102 REFERENCES
    Executive Pay and Shareholder Litigation
    • 193
    Takeover Threats and Managerial Myopia
    • J. Stein
    • Economics
    • Journal of Political Economy
    • 1988
    • 1,287
    • PDF
    Large Shareholders, Monitoring, and the Value of the Firm
    • 1,407
    • Highly Influential
    • PDF