 INCENTIVES TO CORPORATE GOVERNANCE ACTIVISMThe Warwick Economics Research Paper Series (TWERPS) from University of Warwick, Department of Economics Abstract: This paper considers the incentives faced by investors (financial institutions) to become actively involved in the direction of their under-performing portfolio companies as proposed by recent policy reports on corporate governance. It proposes a metric by which to measure the returns to activism in terms of the size of holding, measures of risk and return to the company, the degree of under performance and the level of commission received by fiduciary fund managers. By comparing this with costs of activism it proposes a method by which 'significant shareholdings' may be estimated. A significant shareholding is the level above which a shareholding in a company may be said to have private incentives to activism. This approach is applied to two groups of companies listed on the London Stock Exchange, the top 250 and a ten percent random sample. The results indicate that there are very strong incentives for shareholders to be activist participants in corporate governance among the top 250 companies while there is much more diversity among the smaller companies. Results differ considerably between those where the shareholder is an own-account investor and a fund manager. Keywords: Corporate governance; shareholder activism; incentives; free rider problem; agency (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:wrk:warwec:632 Access Statistics for this paper More papers in The Warwick Economics Research Paper Series (TWERPS) from University of Warwick, Department of Economics Contact information at EDIRC. |
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