The Long-Term Effects of Shareholder Activism

Shareholder activism is growing in popularity across the world and appears to deliver mostly benign results for firms and stockholders. However, testing the effects of activism is problematic.  For at least 30 years, researchers have recognized the difficulty of causal inference when examining ownership and performance.  Perhaps activists systematically target firms that are poised to improve anyway or select liquid stocks to cheaply acquire blocks.  Despite a body of empirical evidence on the positive effects of activism, critics continue to warn of dangers: Activists hunt in highly-motivated and well-resourced wolf packs that exploit regulatory loopholes; they focus on short-term financial … Read more