Clustered shareholder activism

Abstract

Research Question/Issue: This study examines activism campaigns where multiple activists simultaneously target the same firm-which we term clustered shareholder activism. Despite the growing influence of shareholder activism on corporate governance, the clustered activism phenomenon has previously only been addressed indirectly, anecdotally, or with limited data. We consider cost sharing motives for clustered activism and whether the phenomenon exerts a positive or negative impact on the performance of the target firm.Research Findings/Insights: Using a large dataset of shareholder activism events at U.S. firms, we find that clustered activism campaigns are more common at larger firms and among geographically proximate activists, which is consistent with our prediction that activists cluster to reduce the costs associated with activism campaigns. Furthermore, we find that clustered activism produces elevated profitability and abnormal returns, which is consistent with our prediction that activists cluster to address principal-agency costs.Theoretical/Academic Implications: Our study provides some of the first theoretical and empirical evidence on the clustered activism phenomenon. We contribute to the understanding of the role of shareholder activism by considering their effect on principal-agency and principal-principal problems. Our results also contribute to the literature that examines factors relating to the success of shareholder activism by documenting the effect of clustered activism on activism costs and target firm performance.Practitioner/Policy Implications: Our study adds to the debate among practitioners and regulators on the merits (or lack thereof) of clustered activism. Our findings suggest that a regulatory approach that encourages clustered activism can benefit shareholders. Video Abstract: https

Governança Corporativa: Fator Preponderante no Ativismo de Acionistas no Brasil

“…The x-axis represents the quantile distribution according to the SAIM, the indicator of shareholders' activism at meetings defined in Table 2. The relationship between performance (QTOBIN) and activism is positive and increasing, indicating that the improvement in performance may lead to an increase in shareholder activism, but with non-significant results (CI 90%). Although the direction of this relationship was not as expected, the results are compatible with those obtained by Brav, Jiang, Partnoy, and Thomas (2008) and by González and Calluzzo (2019).…”

“…Empirical studies have approached the theme through several aspects, such as: motivation; background; processes, and results (Goranova & Ryan, 2014), showing, however, little consensus on cause and effect relationships, which may be associated with difficulties in relation to the heterogeneity of activists and their goals (Brav, Jiang, Partnoy, & Thomas, 2008;González & Calluzzo, 2019) and their different mechanisms of action (Aguilera et al, 2015), as well as their unobservable actions (McCahery, Sautner, & Starks, 2015).…”

“…With regard to shareholder activism and the performance of target companies, contrasting results were observed: while some studies reported an increase in the value of the firm when adopting better CG and in the presence of more investor activism (Brav et al, 2008;Cuñat, Gine, & Guadalupe, 2012;Denes, Karpoff, & McWilliams, 2017;González & Calluzzo, 2019), others, focused on the domestic environment, presented inconclusive results (Brandão & Crisóstomo, 2015;Pereira, 2010;Xavier, Marcon, Lana, & Silva, 2013).…”

The evolution of corporate governance and agency control: the effectiveness of mechanisms in creating value for companies with IPO on the Brazilian stock exchange

“…According to them, the quality of corporate governance practices is seen as a source of information that provides additional decision-making criteria. For Aguilera et al (2016) and Claessens and Yurtoglu (2013), the popularization of Governance Corporate (GC) both in the academic field, and organizational and political context, highlights the importance and necessity of incentive and improve the effectiveness of monitoring mechanisms (González and Calluzzo, 2019).…”

Successful private investor activism in an emerging market

“…Engagement success might look very different at smaller investors who do not enjoy the same level of access to boardrooms as OMIG and those that have smaller ESG teams. Future researchers could consider the effects of cluster activism (as suggested by Artiga González and Calluzzo, 2018) in an emerging market context. More attention could also be given to shareholder activism as a social movement.…”