Leader-Follower Dynamics in Shareholder Activism

Esat Doruk Cetemen, Gonzalo Cisternas, Aaron Kolb () and S Viswanathan
Additional contact information
Gonzalo Cisternas: https://www.newyorkfed.org/research/economists/cisternas
Aaron Kolb: https://kelley.iu.edu/faculty-research/faculty-directory/profile.html?id=KOLBA
S Viswanathan: https://www.fuqua.duke.edu/faculty/s-viswanathan

No 20230906, Liberty Street Economics from Federal Reserve Bank of New York

Abstract: Activist shareholders play a central role in modern corporations, influencing the capital structure, business strategy, and governance of firms. Such “blockholders” range from investors who actively jawbone or break up firms to index funds that are largely passive in that they limit themselves to voting. In between, however, is a key group of blockholders that have historically focused on trading but have embraced activism as an established business strategy in the past few decades. Campaigns involving such “trading” blockholders have become ubiquitous, increasingly targeting large-capitalization firms; further, their attacks feature multiple activists, each with individual stakes that, in isolation, are unable to control targets. In this post, we ask three questions: (1) How do trading activists build stakes before an attack, while anticipating that other investors may have similar incentives? (2) Does the nature of strategic trading change relative to settings where activism is unlikely to occur? (3) Are there trade-offs between trading and the firm’s long-term value?

Keywords: financial markets; stocks; trading; activism (search for similar items in EconPapers)
JEL-codes: G1 G2 (search for similar items in EconPapers)
Date: 2023-09-06
References: Add references at CitEc
Citations:

Downloads: (external link)
https://libertystreeteconomics.newyorkfed.org/2023 ... hareholder-activism/ Full text (text/html)

Related works:
Working Paper: Leader-Follower Dynamics in Shareholder Activism (2022)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:fip:fednls:96703

Ordering information: This working paper can be ordered from

Access Statistics for this paper

More papers in Liberty Street Economics from Federal Reserve Bank of New York Contact information at EDIRC.
Bibliographic data for series maintained by Gabriella Bucciarelli ().