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Offensive Shareholder Activism in U.S. Public Companies, 1900-49


Brian R. Cheffins


University of Cambridge - Faculty of Law; European Corporate Governance Institute (ECGI)

John Armour


University of Oxford - Faculty of Law; University of Oxford - Said Business School; European Corporate Governance Institute (ECGI)

February 11, 2011

University of Cambridge Faculty of Law Research Paper No. 09/2011

Abstract:     
“Offensive shareholder activism” involves buying up sizeable stakes in underperforming companies and agitating for changes predicted to increase shareholder returns. Though hedge funds are currently highly publicized practitioners of this corporate governance tactic, there has been no analysis of the extent to which managers of U.S. public companies were faced with challenges of this nature during the first half of the 20th century. This paper correspondingly examines instances during this period where investors engaged in offensive shareholder activism, based on a hand collected dataset of proxy contests occurring between 1900 and 1949. Our findings indicate that offensive shareholder activism, while not commonplace, did occur and was considerably more prevalent in the 1930s and 1940s than in earlier decades. We explain our results by reference to a simple model of offensive shareholder activism and argue that the ebb and flow of takeover activity may have been the primary determinant of the trends we observe.

Number of Pages in PDF File: 36

Keywords: Shareholder Activism, Takeovers, Proxy Regulation

JEL Classification: K22, N21, N22

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Date posted: February 12, 2011 ; Last revised: February 21, 2011

Suggested Citation

Cheffins, Brian R. and Armour, John, Offensive Shareholder Activism in U.S. Public Companies, 1900-49 (February 11, 2011). University of Cambridge Faculty of Law Research Paper No. 09/2011. Available at SSRN: http://ssrn.com/abstract=1759983 or http://dx.doi.org/10.2139/ssrn.1759983

Contact Information

Brian R. Cheffins (Contact Author)
University of Cambridge - Faculty of Law ( email )
10 West Road
Cambridge, CB3 9DZ
United Kingdom
+44 1223 330084 (Phone)
+44 1223 330055 (Fax)

European Corporate Governance Institute (ECGI)
c/o ECARES ULB CP 114
B-1050 Brussels
Belgium
John Armour
University of Oxford - Faculty of Law ( email )
Oriel College
Oxford, OX1 4EW
United Kingdom
+44 1865 286544 (Phone)
University of Oxford - Said Business School ( email )
Park End Street
Oxford, OX1 1HP
Great Britain
European Corporate Governance Institute (ECGI) ( email )
c/o ECARES ULB CP 114
B-1050 Brussels
Belgium
HOME PAGE: http://www.ecgi.org
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