Exit as Governance : An Empirical Analysis

  title={Exit as Governance : An Empirical Analysis},
  author={Sreedhar T. Bharath and Sudarshan Jayaraman and Venky Nagar},
Recent theory posits a new corporate governance channel available to blockholders: the threat of exit. Threats, however, are distinct from actual exits and thus difficult to measure directly. This paper exploits financial crises as natural experiments that exogenously changed stock liquidity and thus the credibility of blockholder exit threats. During these crises, firms with larger blockholder ownership suffered larger declines in firm value, attesting to the governance role of exit threats… CONTINUE READING