Activism and Takeovers

Mike Burkart and Samuel Lee

The Review of Financial Studies, 2022, vol. 35, issue 4, 1868-1896

Abstract: We compare activism and takeovers from the perspective of a blockholder who can provide effort to improve firm value. We show that free-riding behavior by dispersed shareholders has the following implications: First, activism can be more profitable than a hostile takeover even if it is less efficient. Second, activism is most efficient when it brokers, rather than substitutes for, takeovers. Third, such takeover activism earns superior returns. More broadly, our theory implies that activists specialize in governance reforms with limited, temporary ownership being a strength rather than a shortcoming of activism.

JEL-codes: G23 G34 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (2)

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Working Paper: Activism and takeovers (2022)
Working Paper: Activism and Takeovers (2018)
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