Activism and Empire Building

Activism and Empire Building

Nickolay Gantchev, Merih Sevilir, Anil Shivdasani

Series number :

Serial Number: 
575/2018

Date posted :

September 27 2018

Last revised :

September 10 2019
SSRN Share

Keywords

  • shareholder activism • 
  • Hedge Funds • 
  • mergers and acquisitions • 
  • Corporate governance • 
  • empire building

Hedge fund activists target firms engaging in empire building and improve their future acquisition and divestiture strategy. Following intervention, activist targets make fewer acquisitions but obtain substantially higher returns by avoiding large and diversifying deals and refraining from acquisitions during merger waves.

Activist targets also increase the pace of divestitures and achieve higher divestiture returns than matched non-targets. Activists curtail empire building through the removal of empire building CEOs, compensation based incentives, and appointment of new board members. Our findings highlight an important channel through which activists improve efficiency and create shareholder value.

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Authors

Associate Professor of Finance
Real name:
Merih Sevilir
Indiana University Kelley School of Business
Real name:
Anil Shivdasani