A Theory of Shareholder Activism and its Place in Corporate Law

Sharfman, Bernard S.

doi:10.2139/ssrn.2549757

Cited by 4 publications

(7 citation statements)

References 12 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…It is difficult for many corporate owners to monitor management and to address the conflicts of interest that arise in this relationship and, to do this, they incur in monitoring costs (Jensen and Meckling, 1976). The CG system of a company is a set of internal and external mechanisms, which include contracting, such as in property rights, executive compensation and debt covenants, as well as corrective shareholder engagement that seeks to align the interests of managers, which exert control, with those of owners (Sharfman, 2014;Jensen and Meckling, 1976). Shareholder engagement and activism, as well as ownership structure and board independence, are among these mechanisms (Sharfman, 2014).…”

Section: Theory Background and Antecedents To Shareholder Activismmentioning

confidence: 99%

“…The CG system of a company is a set of internal and external mechanisms, which include contracting, such as in property rights, executive compensation and debt covenants, as well as corrective shareholder engagement that seeks to align the interests of managers, which exert control, with those of owners (Sharfman, 2014;Jensen and Meckling, 1976). Shareholder engagement and activism, as well as ownership structure and board independence, are among these mechanisms (Sharfman, 2014). In many countries, it is quite common that the largest shareholders not only hold a substantial or majority portion of the voting equity capital but also engage in management and dominate the board, leading to conflicts of interest between controlling and minority shareholders.…”

Section: Theory Background and Antecedents To Shareholder Activismmentioning

confidence: 99%

See 1 more Smart Citation

Shareholder activism impact on efficiency in Brazil

Guimarães

Leal

Morey

2019

View full text Add to dashboard Cite

Purpose This paper aims to investigate the long-term impact of shareholder activism on Brazilian listed companies. Design/methodology/approach This study uses a sample of 194 companies in 2010, 2012 and 2014 and a two-stage data envelopment analysis to generate an efficiency score based on corporate governance, ownership structure and financial characteristics of companies. In the second stage, the study applies a bootstrap truncated regression to identify whether there is a relationship between the efficiency scores and a company-level activism index. Findings The results show a negative correlation between the efficiency scores and the activism index, suggesting that activist shareholders tend to target less efficient companies. A time analysis over the period 2010-2014 does not offer evidence of impacts of activism on changes of the efficiency scores. Practical implications Activist shareholders target less efficient companies. Shareholder activism increased after regulation that facilitated shareholder voting and required greater company transparency was introduced. Originality/value The two-stage nature of the procedure used in the analysis ascertains that this result is not spurious, assuring data separability between productive resources and contextual variables. This study contributes to the scarce literature on activism in emerging markets.

show abstract

Section: Theory Background and Antecedents To Shareholder Activismmentioning

confidence: 99%

Section: Theory Background and Antecedents To Shareholder Activismmentioning

confidence: 99%

Shareholder activism impact on efficiency in Brazil

Guimarães

Leal

Morey

2019

View full text Add to dashboard Cite

show abstract

“…Studies provide equivocal evidence that the short-termism of investors is incompatible with long-term benefits for the firm (Bebchuk et al, 2015;Brav, Jiang, Partnoy & Thomas, 2008a;Buchanan, Chai & Deakin, 2014;Katelouzou, 2013) and analyses (Coffee & Palia, 2014;Schneider & Ryan, 2011;Sharfman, 2015;Venkiteshwaran, Iyer & Rao, 2010). Investors may also work together to increase their salience when confronting management.…”

Section: Shareholder Actionsmentioning

confidence: 99%

“…Such actions are not necessarily detrimental to the company and its long‐term prospects. Studies provide equivocal evidence that the short‐termism of investors is incompatible with long‐term benefits for the firm (Bebchuk et al, ; Brav, Jiang, Partnoy & Thomas, ; Buchanan, Chai & Deakin, ; Katelouzou, ) and analyses (Coffee & Palia, ; Schneider & Ryan, ; Sharfman, ; Venkiteshwaran, Iyer & Rao, ).…”

Section: Processes Of Investor–firm Interactionmentioning

confidence: 99%

Ownership, Activism and Engagement: Institutional Investors as Active Owners

McNulty¹,

Nordberg²

2015

Corporate Governance

113

View full text Add to dashboard Cite

Manuscript Type: Conceptual Research Question/Issue: We research two questions: First, why do some institutional investors operate at a distance from organizations seemingly acting only to "exit" and "trade" shares, while others actively engage through various means of "voice"? Second, what processes and behaviour are associated with active ownership? Research Findings/Insights: We develop the concept of active ownership by drawing on contrasting theories and images of ownership, identifying antecedents of active ownership and distinguishing between alternative processes of active ownership. Theoretical/Academic Implications: Alternative pathways to active ownership contrast the distant, sometimes adversarial nature of shareholder activism with an engaged, collaborative relationship between investors and corporations. Few studies examine active ownership as a process of engagement and mutual exchange between parties taking a generally longer-term perspective toward investment in the firm and its affairs. After modeling active ownership, we develop a research agenda of substantive issues ranging from market and institutional conditions, through investment organization and practice, to board and investor relations. Practitioner/Policy Implications: Opening up the multidimensionality of engagement and relations between investors and corporations is crucial to promoting good corporate governance. Policymakers and practitioners require such knowledge when anticipating and developing adjustments to institutions of corporate governance.

show abstract

“…Worldwide, there are differences in how much impact the shareholders can have on governance practices. The legal and cultural framework may allow SA to have leverage on corporations and boards of directors (Sharfman, 2014).…”

Section: Introductionmentioning

confidence: 99%

Shareholders’ activism as a moderator of the relationship between corporate governance and return on investment

Albakoush

Ishak

2019

Investment Management and Financial Innovations

View full text Add to dashboard Cite

The purpose of shareholders’ involvement in the process of governance is to add corporate value and achieve better governance and firm performance (FP). However, corporate governance (CG) practices can vary from country to country and change over time. This study examines the moderating influence of shareholders’ activism (SA) on the CG effectiveness – FP relationship in non-financial companies listed in the Libyan Stock Market between 2007 and 2016. CG effectiveness was the independent variable and consisted of five dimensions: board of directors, monitoring committee, audit committee, nomination and compensation committee, and ownership. Leverage, firm age and firm size were used as control variables. Return on investment was used to assess the corporate performance. SA was tested as a moderating variable using the interactive regression models. The study found out that the CG effectiveness is positively and significantly related to return on investment (beta = 0.608, p &lt; 0.01). This relationship was strengthened by SA (R2 = 0.053, P &lt; 0.05). Overall, the study shows that SA boosts the relationship between CG and FP in the Libyan Stock Market.

show abstract

A Theory of Shareholder Activism and its Place in Corporate Law

Cited by 4 publications

References 12 publications

Shareholder activism impact on efficiency in Brazil

Shareholder activism impact on efficiency in Brazil

Ownership, Activism and Engagement: Institutional Investors as Active Owners

Shareholders’ activism as a moderator of the relationship between corporate governance and return on investment

Contact Info

Product

Resources

About