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Nickolay Gantchev, Merih Sevilir, Anil Shivdasani Activism and Empire Building (27 Sep 2018) Available at ECGI: https://ecgi.global/working-paper/activism-and-empire-building-0
We study the role of hedge fund activists in curbing empire building. We show that firms with poor acquisition records are more likely to become activist targets. Following activist intervention, targeted firms make fewer acquisitions but obtain substantially higher abnormal returns.
These firms avoid large transactions, diversifying deals, and refrain from announcing deals during merger waves. After an activist campaign, targets increase the pace of divestitures and achieve higher announcement and long-term returns from divestitures than firms without activist intervention. Our results are consistent with a treatment effect whereby the activists’ interventions both improve their targets’ acquisition strategy and lower reluctance to divest assets. Our findings highlight an important channel through which activists improve the efficiency of public companies.
The big corporate governance debates nowadays concern the corporation’s time horizons, and the balance of power between shareholders and managers. In response to actual and anticipated pressure from shareholder activists – typically, activist...Read more
This paper provides an overview of the academic literature on the market for corporate control, and focuses specifically on firms’ performance around and after a takeover. Despite the aggregate M&A market amounting to several trillions USD on...Read more
Index funds own an increasingly large proportion of American public companies, currently more than one fifth and steadily growing. The stewardship decisions of index fund managers—how they monitor, vote, and engage with their portfolio companies...Read more
In this Article, we make several contributions to the literature on appraisal rights and similar cases in which courts assign values to a company’s shares in the litigation context. First, we applaud the recent trend in Delaware cases to focus on...Read more