Competition for Flow and Short-Termism in Activism

Autor:	Amil Dasgupta, Mike Burkart
Rok vydání:	2020
Předmět:	HB Economic Theory Economics and Econometrics HG Finance Leverage (finance) Monetary economics Short termism Competition (economics) Debt overhang Fragility Incentive Agency (sociology) Business Business and International Management Asset manager Finance
Zdroj:	The Review of Corporate Finance Studies. 10:44-81
ISSN:	2046-9136 2046-9128
DOI:	10.1093/rcfs/cfaa023
Popis:	We develop a dual-layered agency model to study blockholder monitoring by activist funds competing for investor flow. Competition for flow affects the manner in which activist funds govern as blockholders. In particular, funds inflate their short-term performance by increasing payouts that are financed by higher (net) leverage. Doing so subsequently discourages value-creating interventions during economic downturns because of debt overhang. Our theory suggests a new channel via which asset manager incentives may foster economic fragility and links together the observed procyclicality of activist investments with the documented effect of such funds on the leverage of their target companies. (JEL G34, G23) Received July 2, 2020; editorial decision August 8, 2020; Editor Uday Rajan.
Databáze:	OpenAIRE
Externí odkaz:	https://explore.openaire.eu/search/publication?articleId=doi_dedup___::f9b8787f3f4ebcb656186a03fd47089a https://doi.org/10.1093/rcfs/cfaa023 Zobrazit plný text záznamu