The role of stock liquidity in blockholder governance: Evidence from corporate social responsibility
Year: 2024
Type: article
Abstract: We use decimalization of the tick size, which exogenously increases stock liquidity and thereby heightens blockholder governance, to identify its effect on corporate social responsibility (CSR). We find that enhanced blockholder governance after decimalization leads to lower excessive CSR performance and higher firm value. Compared to active blockholders, passive blockholders, relying on the threat of selling shares and exiting, drive our results. The inverse relationship between blockholder governance and CSR is more pronounced for firms with poor corporate governance prior to decimalization. Our evidence suggests that blockholder exit threat can serve as a governance device to alleviate agency‐driven CSR.
Source: Financial Review
DOI: 10.1111/fire.12410
Authors: Steven Freund, Hieu V. Phan, Lingna S. Sun, Hong Vo
Language: English
Subfield: Strategy and Management
Domain: Social Sciences
Open Access status: hybrid
Estimated APC paid: $2,760
OpenAlex ID: W4401975020