Abstract

http://ssrn.com/abstract=1733800
 
 

References (9)



 
 

Citations (1)



 


 



Is Carl Icahn Good for Long-Term Shareholders? A Case Study in Shareholder Activism


Vinod Venkiteshwaran


affiliation not provided to SSRN

Subramanian Iyer


Oklahoma State University - Stillwater

Ramesh P. Rao


Oklahoma State University - Stillwater - Spears School of Business - Department of Finance

December 23, 2010

Journal of Applied Corporate Finance, Vol. 22, Issue 4, pp. 45-57, 2010

Abstract:     
The increase in activist campaigns by entrepreneurial investors and hedge funds in the past decade has raised considerable debate about their benefits for average shareholders. Although critics have longed charged that the proposals for change by such active investors typically do not increase the longer-run efficiency and values of the targeted companies, more recent studies have provided evidence of success, both in terms of increasing the market value of such companies and achieving at least some of the investors' expressed objectives.

This article attempts to add to these findings by examining the case of a single well-known investor, Carl Icahn, whose career as a shareholder activist now spans at least three decades. The authors report, first of all, that Icahn's targets have included companies from a remarkable variety of industries, and that his stated objectives have varied with the industries of the targets. Although more of Icahn's targets appear to have been overleveraged than underleveraged, a significant minority have had payouts ratios that were judged to be too low and more cash than they needed.

In terms of Icahn's effect on other shareholders, the authors report a significant positive stock price reaction - on the order of 10% - to the announcement of Icahn's taking a position in the target firm. When examining the subsequent performance of the target firms, the authors found a very large difference between those firms that were either taken private or acquired (within 18 months) - over a third of the target companies - and those that remained independent. The authors report that although the acquired group achieved significant positive stock market returns, the firms that remained independent suffered very negative (-60%) returns. Although Icahn's proposed changes could be responsible, as critics charge, for the performance of the latter group, the authors suggest that the success of many of these companies in fending off Icahn without enacting most of his proposed reforms is a more plausible explanation. At the same time, the authors report that Icahn was successful in achieving at least one of his stated objectives in well over half of the cases in which the target companies remained independent.

Number of Pages in PDF File: 15

Accepted Paper Series


Date posted: January 3, 2011  

Suggested Citation

Venkiteshwaran, Vinod and Iyer, Subramanian and Rao, Ramesh P., Is Carl Icahn Good for Long-Term Shareholders? A Case Study in Shareholder Activism (December 23, 2010). Journal of Applied Corporate Finance, Vol. 22, Issue 4, pp. 45-57, 2010. Available at SSRN: http://ssrn.com/abstract=1733800 or http://dx.doi.org/10.1111/j.1745-6622.2010.00301.x

Contact Information

Vinod Venkiteshwaran
affiliation not provided to SSRN
Subramanian Iyer
Oklahoma State University - Stillwater ( email )
Stillwater, OK 74078-0555
United States
Ramesh P. Rao
Oklahoma State University - Stillwater - Spears School of Business - Department of Finance ( email )
Spears School of Business
Stillwater, OK 74078-4011
United States
405-744-1385 (Phone)
405-744-5180 (Fax)
Feedback to SSRN


Paper statistics
Abstract Views: 2,576
Downloads: 52
Download Rank: 227,214
References:  9
Citations:  1

© 2014 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollo1 in 0.328 seconds