Activism and takeovers

Mike Burkart and Samuel Lee

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

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: F3 G3 J01 R14 (search for similar items in EconPapers)
Pages: 29 pages
Date: 2022-04-01
New Economics Papers: this item is included in nep-ore
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Citations: View citations in EconPapers (1)

Published in Review of Financial Studies, 1, April, 2022, 35(4), pp. 1868 - 1896. ISSN: 0893-9454

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http://eprints.lse.ac.uk/111564/ Open access version. (application/pdf)

Related works:
Journal Article: Activism and Takeovers (2022)
Working Paper: Activism and Takeovers (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:111564

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