Exit vs. Voice

Broccardo, Eleonora; Hart, Oliver; Zingales, Luigi

doi:10.3386/w27710

“…Our study is also closely related to the literature on shareholders' ability to influence firms through exit (see, e.g., Admati and Pfleiderer, 2009;Bharath, Jayaraman, and Nagar, 2013). 8 Broccardo, Hart, and Zingales (2020) show theoretically that the exit options of investors and consumers -two important stakeholder groups -share similarities as they represent an effective means of pressuring firms. In a related study of customers punishing firms, Homanen (2018) finds evidence of depositors disciplining banks by withdrawing their deposits.…”

Section: Introductionsupporting

confidence: 59%

Competition and the Reputational Costs of Litigation

Meyerinck

¹

,

Pursiainen

²

,

Schmid

³

2020

SSRN Journal

0

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We study the role of competition in customers' reactions to litigation against firms, using anonymized mobile phone location data. A class action lawsuit filing results in a 4% average reduction in customer visits to target firms' outlets in the following months. The effect strongly depends on competition. Outlets facing more competition experience significantly larger negative effects. Closer competition matters more, both in terms of geographic and industry proximity. Announcement returns and quarterly accounting revenues around lawsuit filings also strongly depend on competition. Our results suggest that competition is an important component in customers' ability to discipline firms for misbehavior.

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“…Our study is also closely related to the literature on shareholders' ability to influence firms through exit (see, e.g., Admati and Pfleiderer, 2009;Bharath, Jayaraman, and Nagar, 2013). 8 Broccardo, Hart, and Zingales (2020) show theoretically that the exit options of investors and consumers -two important stakeholder groups -share similarities as they represent an effective means of pressuring firms. In a related study of customers punishing firms, Homanen (2018) finds evidence of depositors disciplining banks by withdrawing their deposits.…”

Section: Introductionsupporting

confidence: 54%

Competition and the Reputational Costs of Litigation

von Meyerinck,

Pursiainen,

Schmid

2021

SSRN Journal

1

0

View full text Add to dashboard Cite

We study the role of competition in customers' reactions to litigation against firms, using anonymized mobile phone location data. A class action lawsuit filing results in a 4% average reduction in customer visits to target firms' outlets in the following months. The effect strongly depends on competition. Outlets facing more competition experience significantly larger negative effects. Closer competition matters more, both in terms of geographic and industry proximity. Announcement returns and quarterly accounting revenues around lawsuit filings also strongly depend on competition. Our results suggest that competition is an important component in customers' ability to discipline firms for misbehavior.

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“…3 See Appendix Figure A.1. 4 Broccardo, Hart & Zingales (2020) refer to this approach as exit. Alternatively, shareholders could also use voting power (their 'voice') to influence emitting firms' actions.…”

Section: Introductionmentioning

confidence: 99%

“…Many begin from the contractarian perspective that companies exist for the benefit of shareholders (Berle 1930). However, the proposition that this translates to profit maximization (Friedman 1970), while largely accepted for many decades, has been challenged in recent years (Hart & Zingales 2017, Broccardo et al 2020). 10 Taking an objective as given, good governance helps ensure that companies actually pursue this objective (Shleifer & Vishny 1997).…”

Section: Introductionmentioning

confidence: 99%

Limits to Private Climate Change Mitigation

Elmalt¹,

Igan²,

Kirti³

2021

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As climate change looms larger, many look to sustainable investing that incorporates environmental, social, and governance (ESG) concerns as part of the way forward. To assess scope for ESG-conscious investing to achieve climate change goals, we explore the link between emissions growth and ESG scores using firm-level data for the largest emitters around the world. Discouragingly, our analysis uncovers at best a weak relationship: firms with better ESG scores do display somewhat slower emissions growth but this link is substantially attenuated and no longer statistically significant if we limit attention to within-country or within-firm variation. Our findings suggest limited scope for sustainable investing strategies conditioned solely on ESG indicators to meaningfully help mitigate climate change and, more broadly, underscore the need to continue to build consensus towards effective economy-wide policies to address climate change.

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Exit vs. Voice

Cited by 67 publications

References 0 publications

Competition and the Reputational Costs of Litigation

Competition and the Reputational Costs of Litigation

Competition and the Reputational Costs of Litigation

Limits to Private Climate Change Mitigation

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