NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Blockholders and Corporate Governance

Alex Edmans

NBER Working Paper No. 19573
Issued in October 2013
NBER Program(s):   CF   LE

This paper reviews the theoretical and empirical literature on the different channels through which blockholders (large shareholders) engage in corporate governance. In classical models, blockholders exert governance through direct intervention in a firm's operations, otherwise known as "voice." These theories have motivated empirical research on the determinants and consequences of activism. More recent models show that blockholders can govern through the alternative mechanism of "exit" - selling their shares if the manager underperforms. These theories give rise to new empirical studies on the two-way relationship between blockholders and financial markets, linking corporate finance with asset pricing. Blockholders may also worsen governance by extracting private benefits of control or pursuing objectives other than firm value maximization. I highlight the empirical challenges in identifying causal effects of and on blockholders, and the typical strategies attempted to achieve identification. I close with directions for future research.

download in pdf format
   (183 K)

email paper

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w19573

Published: Alex Edmans, 2014. "Blockholders and Corporate Governance," Annual Review of Financial Economics, Annual Reviews, vol. 6(1), pages 23-50, December. citation courtesy of

Users who downloaded this paper also downloaded these:
Back, Li, and Ljungqvist w19669 Liquidity and Governance
Adams, Hermalin, and Weisbach w14486 The Role of Boards of Directors in Corporate Governance: A Conceptual Framework and Survey
Hermalin and Weisbach w20028 Understanding Corporate Governance Through Learning Models of Managerial Competence
Guiso, Sapienza, and Zingales w19557 The Value of Corporate Culture
Bebchuk and Weisbach w15537 The State of Corporate Governance Research
 
Publications
Activities
Meetings
NBER Videos
Themes
Data
People
About

National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us