Munich Personal RePEc Archive

Reputation and the Wall Street Walk

Asano, Koji (2023): Reputation and the Wall Street Walk.

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This study examines whether the threat of exit by blockholders can alleviate managers' moral hazard problems when they have reputation concerns in stock markets. When future cash flows decline over time, the threat of exit and reputation concerns both discipline managers. However, when future cash flows rise over time, blockholders trade based on information about the managers' commitment ability rather than their past performance, thereby weakening reputational discipline.

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