Thirty years of shareholder activism: A survey of empirical research

Denes, Matthew; Karpoff, Jonathan M.; McWilliams, Victoria B.

doi:10.1016/j.jcorpfin.2016.03.005

Cited by 219 publications

(145 citation statements)

References 96 publications

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“…In a literature review of investor activism, Denes et al (2016) argue that shareholder activism works when it is associated with block ownership. Cronqvist and Fahlenbrach (2009) point out that not all blockholders are the same or have the same motivations.…”

Section: Blockholder Activism Amid Blockholder Heterogeneitymentioning

confidence: 99%

Does Fed policy affect blockholder behavior in U.S. publicly traded firms?

Kaya

Lumpkin-Sowers

2017

Investment Management and Financial Innovations

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This paper documents the empirical relationship between ownership concentration and monetary policy to fill out the picture for when ownership concentration is likely to change within U.S. publicly traded firms. The sample is drawn from the Dlugosz et al. (2006) data set for firms between 1996 and 2001. The authors explore the patterns between the Federal Reserve's policy position and ownership concentration rather than asserting causal direction between the two. This empirical paper tests alternative theories on blockholder activism by examining whether "voice" or "exit" is more dominant under contractionary monetary policy. Using the series of same direction changes in the Federal Funds Rate to establish time periods as a proxy for monetary policy in the U.S., nonparametric tests show that there are more blockholders per firm, the sum of their blockholdings in percentage terms is higher, and the total percentage held by the blockholder in U.S. firms is greater under contractionary policy periods. This supports an active theory of blockholder behavior in corporate governance.

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Section: Blockholder Activism Amid Blockholder Heterogeneitymentioning

confidence: 99%

Does Fed policy affect blockholder behavior in U.S. publicly traded firms?

Kaya

Lumpkin-Sowers

2017

Investment Management and Financial Innovations

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“…Previous research has considered the direct effects of FII equity ownership on firm performance and other outcomes (Chen, Firth, Gao, & Rui, 2006;He, Li, Shen, & Zhang, 2013;Luo, Chen, & Yan, 2014), but the empirical evidence has been far from conclusive, 2 perhaps because FII equity ownership is typically small as it constrained by local regulations. But the FIIs potentially exert a much greater indirect influence on the governance of their target firms through their trading activities although, as with all informed investors, they are faced with conflicting pressures (Carleton, Nelson, & Weisbach, 1998;Chakravarty & Sarkar, 2002;Denes, Karpoff, & McWilliams, 2016;Gillan & Starks, 2007;Hartzell & Starks, 2003;Kyle, 1985;Song & Szewczyk, 2003).…”

Section: Theory and Hypothesis Developmentmentioning

confidence: 99%

Informed trading by foreign institutional investors as a constraint on tunneling: Evidence from China

Zhang

Yang

Strange

et al. 2017

Corporate Governance

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Manuscript Type: EmpiricalResearch Question/Issue: This paper investigates how the trading activities of foreign institutional investors (FIIs) affect the tunneling activities of controlling shareholders in an emerging economy (China).Research Findings/Insights: We use an unbalanced panel dataset of 167 FIIs with investments in Chinese real estate firms during the period 2003 to 2011, which gives us 1006 firm-year observations in total. We find strong support for our hypothesis of an inverted U-shaped relationship between FII trading turnover and the extent of tunneling by controlling shareholders.Theoretical/Academic Implications: In many emerging economies, the institutional environment for investor protection is weak. Powerful controlling shareholders may take the opportunity to extract private benefits via tunneling activities to the detriment of minority shareholders, and informed minority investors may also take advantage of less well-informed investors.There are thus multiple principal-principal agency conflicts. FIIs are a particularly important group of informed investors. On the one hand, large-scale aggressive trading by FIIs should drive stock prices to fundamentals, provide market discipline to management, and thus limit tunneling. On the other hand, FIIs may opt to exploit their private knowledge to gain trading profits at the expense of uninformed investors, and implicitly support tunneling. We highlight these potential effects, and demonstrate empirically an inverted U-shaped relationship between FII trading turnover and the extent of tunneling.Practitioner/Policy Implications: Tunneling is a serious issue, particularly in emerging economies where the institutional arrangements for minority investor protection are often weak.FII involvement may enhance market discipline, but may also exacerbate the problem, so policymakers need to guard against potential adverse effects. An ownership cap on FII shareholdings is unlikely to be effective, but policymakers might strengthen QFII license revocation policies and issue more licenses to promote competition among FIIs.

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“…Shareholder voting is a fundamental right granted to most shareholders to influence management decisions and is an effective mechanism for exercising governance (Brickley, Lease, & Smith, 1988;Denes, Karpoff, & McWilliams, 2017;Iliev, Lins, Miller, & Roth, 2015;Yermack, 2010). On one hand, shareholder voting is important for managers to implement shareholder proposals that can enhance firm value (e.g., Cuñat, Gine, & Guadalupe, 2012;Hermanson, Rama, & Ye, 2019).…”

Section: Introductionmentioning

confidence: 99%

Shareholder voting in China: The role of large shareholders and institutional investors

Song

Yang

2019

Corporate Governance

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Manuscript Type Empirical Research Question/Issue Shareholders of nearly every company are given the right to vote, yet relatively little is known about the determinants of their voting behavior. Unique data in China render the votes of large shareholders observable, providing a rare opportunity to study the determinants of shareholder voting. Research Findings/Insights We find that (a) large shareholders are significantly less likely to vote against reform proposals than small shareholders and (b) institutional investors—especially mutual funds (the largest institutional investors in China)—are significantly less likely to vote against proposals than individual investors. Theoretical/Academic Implications We provide strong evidence for insider intervention in the voting process. Our study also adds to the understanding of voting behavior of large shareholders and institutional investors along with their governance roles in countries with weak legal protection for investors. Practitioner/Policy Implications To improve the governance role of shareholder voting in countries with weak investor protection, it is necessary to strengthen the level of disclosure and supervision of shareholder voting decisions.

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Thirty years of shareholder activism: A survey of empirical research

Cited by 219 publications

References 96 publications

Does Fed policy affect blockholder behavior in U.S. publicly traded firms?

Does Fed policy affect blockholder behavior in U.S. publicly traded firms?

Informed trading by foreign institutional investors as a constraint on tunneling: Evidence from China

Shareholder voting in China: The role of large shareholders and institutional investors

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