The Power of Voluntary Disclosure by Activist Shareholders

A key challenge for activist investors is convincing other shareholders that the activist agenda will increase the value of a target firm. Accordingly, activists commonly release public disclosures through traditional and social media, news wires, or their fund’s website. These disclosures are often formatted as open letters aimed at the target’s board, management, or existing shareholders.

In our study, we hand collect a sample of activists’ disclosures and systematically analyze their consequences. We find that they are associated with significantly positive stock returns of 2.4 percent at the target firm around their release dates. These disclosures are also associated with … Read more