When banks become shareholder activists

Keke Song and Jun Wang

Journal of Banking & Finance, 2023, vol. 153, issue C

Abstract: This study investigates the relationships between bank activism and target firms’ debtholder value, shareholder value, and firm performance. We find that bank activists are more likely to target firms with heavier syndicated loan borrowing and lower credit quality than other shareholder activists. Bank activism events are associated with significantly positive abnormal bond returns, and this effect only exists in the subset of observations where bank shareholder activists possess a loan stake in the target firm. The target firms of bank activism exhibit a significant improvement in credit quality, coupled with decreases in syndicated loan interest rate spreads, crash risk, and CEO risk-taking incentives.

Keywords: Banks; Corporate governance; Shareholder activism; Bond returns; Syndicated loans; Crash risk; Conflict of interest; Dual-holding (search for similar items in EconPapers)
JEL-codes: G14 G20 G21 G23 G30 G34 (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:153:y:2023:i:c:s0378426623001164

DOI: 10.1016/j.jbankfin.2023.106895

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