The Costs of Shareholder Activism: Evidence from a Sequential Decision Model

Gantchev, Nickolay

doi:10.2139/ssrn.1646471

Cited by 74 publications

(83 citation statements)

References 39 publications

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“…The first looks at hedge fund activism and is borrowed from Gantchev (2013). Gantchev uses data from 13D filings, proxies, and SharkRepellent.net to track the evolution of activist campaigns instigated by a large set of activist hedge funds between 2000 and 2008.…”

Section: Columns 1 Through 3 Inmentioning

confidence: 99%

Liquidity and Governance

Back¹,

Li²,

Ljungqvist³

2013

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Is greater trading liquidity good or bad for corporate governance? We address this question both theoretically and empirically. We solve a model consisting of an optimal IPO followed by a dynamic Kyle market in which the large investor's private information concerns her own plans for taking an active role in governance. We show that an increase in the liquidity of the firm's stock increases the likelihood of the large investor 'taking the Wall Street walk.' Thus, higher liquidity is harmful for governance. Empirical tests using three distinct sources of exogenous variation in liquidity confirm the negative relation between liquidity and blockholder activism.

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Section: Columns 1 Through 3 Inmentioning

confidence: 99%

Liquidity and Governance

Back¹,

Li²,

Ljungqvist³

2013

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“…Payout at these companies before intervention is lower than that of matched firms indicating a shareholder value creation. Gantchev (2013) modelled hedge fund activism as a sequential decision process consisting of demand negotiations, board representation and proxy contest and estimated the costs of each distinct stage. It was found that the estimated monitoring costs consume more than twothirds of gross activist returns implying that the net returns to activism are significantly lower than previously thought.…”

Section: Shareholder Activismmentioning

confidence: 99%

Study on theories and mechanisms of corporate governance

Mishra

Kapil

2017

IJAAPE

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This paper aims to review the theories of corporate governance for understanding the theoretical basis of corporate governance mechanisms. Major theoretical studies on corporate governance, including studies done in emerging economies, are included in the review. The paper looks at corporate governance theories from value creation point of view. It is observed that the two perspectives of corporate governance, i.e., shareholder and stakeholder perspectives, are not in contrast to each other but are pointing towards the same goal, i.e., value creation. However, one points towards value creation for shareholders and the other points towards creation of societal value. While reviewing theoretical underpinnings and assumptions for corporate governance perspectives, due consideration has been given to the development of corporate governance mechanism based on various existing theories. A theoretical framework for understanding the relationship between corporate governance mechanism and corporate performance has been proposed. Emerging challenges for corporate governance theories have also been indicated. This being a review paper, one of the major limitations is an unintentional omission of some literature because of non-availability or non-reachability. Literature that would have been present in languages other than English could also not been included in the review.

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“…The dissatisfaction of some shareholders with the firm's performance or its management may lead them to consider active and aggressive means to safeguard their interests in the firm and they may become an activist. Activism is a costly affair (Gantchev 2013), and activists weigh their outcomes before committing their resources to a target firm. Unlike the popular image, the observation by some researchers shows that most activists use peaceful means like a dialogue with the board or management at the target firm rather than get confrontational with them.…”

Section: Investor Activismmentioning

confidence: 99%

“…While many have tried to imitate successful activist investors, the performance varies among the activists. Considering monitoring costs and the net returns to shareholder activism, Gantchev (2013) found that the mean net activist return is close to zero but the top quartile of activists earn higher returns on their activist holdings than on their non-activist investments.…”

Section: 186mentioning

confidence: 99%