The Wall Street Rule and its Impact on Board Monitoring
The “Wall Street Rule” (WSR), a form of monitoring by institutional investors, has been viewed as a “cut-and-run” strategy adopted to express dissatisfaction with a company’s management. In this study, we show that WSR, far from being a passive protest, is in fact a potent weapon to improve corporat...
| Main Authors: | , , |
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| Format: | Conference Paper |
| Published: |
2018
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| Online Access: | http://hdl.handle.net/20.500.11937/75437 |
| Summary: | The “Wall Street Rule” (WSR), a form of monitoring by institutional investors, has been viewed as a “cut-and-run” strategy adopted to express dissatisfaction with a company’s management. In this study, we show that WSR, far from being a passive protest, is in fact a potent weapon to improve corporate governance. We present empirical evidence that WSR is positively associated with board monitoring when the firm is endowed with an outsider-dominated board. This suggests that WSR improves stock price informativeness, providing the board with an additional source of information so that it may monitor the company more effectively. |
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