Value creation in shareholder activism

Rui Albuquerque, Vyacheslav Fos and Enrique Schroth

Journal of Financial Economics, 2022, vol. 145, issue 2, 153-178

Abstract: We measure value creation by activist investors via structural estimation of a model of the choice between passive investment and activism. Our estimates imply that average returns following activist intent announcements consist of 74.8% expected value creation, or treatment, 13.4% stock picking, and 11.8% sample selection effects. Higher treatment values predict improvements in firm performance and lower proxy contest probabilities, whereas abnormal announcements returns do not, suggesting that our estimate identifies more effective activism campaigns. The evidence demonstrates the importance of using the joint distribution of investment strategies and announcement returns to recover the expected returns and costs of activism.

Keywords: Shareholder activism; Value creation; Passive investors; Stock picking; Structural estimation (search for similar items in EconPapers)
JEL-codes: C34 G14 G34 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinec:v:145:y:2022:i:2:p:153-178

DOI: 10.1016/j.jfineco.2021.09.007

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