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Blockholder Compensation, Activism, and Efficacy

Christopher P. Clifford

University of Kentucky

Laura Anne Lindsey

Arizona State University (ASU) - Finance Department

August 25, 2011

We examine the relation between blockholder presence and firm performance with a focus on the inherent differences in organizational form and the stated intent among large shareholders. Using hand-collected information on blockholdings for a panel of S&P 1500 firms, we find that firms targeted by blockholders with organizational forms typically associated with performance-sensitive compensation or who file as active experience subsequent improvements in operating and stock price performance. Controlling for the endogeneity of blockholder presence and type, we observe no such improvements for firms targeted by blockholders with weaker compensation incentives or those taking a passive role. Moreover, performance effects are stronger for firms where information asymmetries are more pronounced and for firms with better corporate governance, indicating that, while outside blockholders may serve as a substitute for other monitoring mechanisms, it does not appear that they can fully compensate for shortcomings in governance.

Number of Pages in PDF File: 47

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Date posted: July 19, 2010 ; Last revised: August 28, 2011

Suggested Citation

Clifford, Christopher P. and Lindsey, Laura Anne, Blockholder Compensation, Activism, and Efficacy (August 25, 2011). Available at SSRN: http://ssrn.com/abstract=1644995 or http://dx.doi.org/10.2139/ssrn.1644995

Contact Information

Christopher P. Clifford
University of Kentucky ( email )
College of Business & Economics
Lexington, KY 40506-0034
United States
859-257-3850 (Phone)
Laura Anne Lindsey (Contact Author)
Arizona State University (ASU) - Finance Department ( email )
W. P. Carey School of Business
PO Box 873906
Tempe, AZ 85287-3906
United States
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