Shareholder activism and firms’ performance

Victor Barros, Maria João Guedes, Joana Santos and Joaquim Miranda Sarmento

Research in International Business and Finance, 2023, vol. 64, issue C

Abstract: Increasing attention to activist campaigns raises the question of whether they lead to better performance. The impact of different motives, demands, and proposals is still unclear and, sometimes, contradictory. We used a unique dataset of activist campaigns targeting firms in the US from 2002 to 2017 and analysed the impact of activism on firm performance, considering their specific demands. Our results show that firms experience a decline in profitability almost immediately after campaigns, although the effect is unclear in the years subsequent to the intervention. Results also suggest that campaigns primarily focused on demanding a change in strategic direction or obtaining board control intensify the decline in profitability. Seeking board representation is the type of demand that effectively increases target firms’ profitability. Our analysis adds to research on shareholder governance and competitive dynamics by highlighting that the type of demand adopted in campaigns impacts differently on firms’ performance.

Keywords: Shareholder activism; Corporate governance; Shareholder resolution; Financial performance (search for similar items in EconPapers)
JEL-codes: G32 G34 G39 (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:eee:riibaf:v:64:y:2023:i:c:s027553192200246x

DOI: 10.1016/j.ribaf.2022.101860

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