Are financial constraints of corporate activist investors perceived negatively?

Leopold Ingenohl () and Nicolas Kube
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Leopold Ingenohl: University of St. Gallen

Financial Markets and Portfolio Management, 2018, vol. 32, issue 4, No 2, 367-398

Abstract: Abstract This paper shows that financial constraints of corporate activist investors are negatively perceived by the market. By conducting an event study on a sample of 561 Schedule 13(D) filings disclosed by US corporations in the years 1996–2016, abnormal share price reactions in the [−10, $$+$$ + 3] event window are about 10.8% lower for targets of financially constrained corporate investors. The average abnormal return for all targets is equal to 13.4%. This positive market response suggests that activism results in actual value improvement for the target. Yet, our analyses show that value improvements crucially depend on the investor’s access to external financing.

Keywords: Event study; Activist investors; Financial constraints (search for similar items in EconPapers)
JEL-codes: G14 G23 G32 (search for similar items in EconPapers)
Date: 2018
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DOI: 10.1007/s11408-018-0321-8

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