We measure value creation by activist investors via structural estimation of a model of the choice between passive investment and activism. Our estimates imply that average returns following activist intent announcements consist of 74.8% expected value creation, or treatment, 13.4% stock picking, and 11.8% sample selection effects.
Higher treatment values predict improvements in firm performance and lower proxy contest probabilities, whereas abnormal announcements returns do not, suggesting that our estimate identifies more effective activism campaigns. The evidence demonstrates the importance of using the joint distribution of investment strategies and announcement returns to recover the expected returns and costs of activism.
Controlling shareholders have been directly involved in some of the largest and most consequential bribery scandals in the world over the course of the...
Using natural language processing, we identify and categorize the corporate goals in the shareholder letters of the 150 largest companies in the United...
A common argument against divestment is that it jettisons voting power and that it has a small effect on stock prices. We argue that divestment is a form of...