Discussion Paper Details

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Title: Exit vs. Voice

Author(s): Eleonora Broccardo, Oliver Hart and Luigi Zingales

Publication Date: August 2020

Keyword(s): Boycott, Divestment, engagement, exit, Social Responsibility and voice

Programme Area(s): Industrial Organization

Abstract: We study the relative effectiveness of exit (divestment and boycott) and voice (engagement) strategies in promoting socially desirable outcomes in companies. We show that in a competitive world exit is less effective than voice in pushing firms to act in a socially responsible manner. Furthermore, we demonstrate that individual incentives to join an exit strategy are not necessarily aligned with social incentives, whereas they are when well-diversified investors are allowed to express their voice. We discuss what social and legal considerations might sometimes make exit preferable to voice.

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Bibliographic Reference

Broccardo, E, Hart, O and Zingales, L. 2020. 'Exit vs. Voice'. London, Centre for Economic Policy Research.