Insider Activism

Corporate governance mechanisms that mitigate problems associated with the separation of ownership and control include board monitoring of managers, compensation incentives, a market for corporate control, and government regulation. Recently, shareholder activism has become an increasingly popular tool as well. Typically, activism involves a hedge fund or other institutional investor with an arm’s-length relationship to a firm acquiring a concentrated stake in that firm and prodding management to make value-enhancing changes. In our study, we find that individual investors who are at the periphery of control, such as founders and former executives, also launch activist campaigns, a phenomenon we term … Read more