Shareholder activism in small-cap newly public firms

Pezier, Emmanuel; Volpin, Paolo F.

doi:10.2139/ssrn.3400918

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Shareholder activism in small-cap newly public firms

Financial Analysts Journal, 2024, 80(2): 52-73.

61 Pages Posted: 12 Jun 2019 Last revised: 25 Apr 2024

See all articles by Emmanuel Pezier

Emmanuel Pezier

University of Oxford, Saïd Business School

Paolo F. Volpin

Drexel University - Bennett S. LeBow College of Business; Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI); City University London - Faculty of Finance

Date Written: November 10, 2023

Abstract

We examine a private dataset of engagements by a UK fund in small-cap newly-public firms. The fund inherits unwanted holdings from disparate investors and earns fees liquidating its portfolio. It considers activism only when blocks cannot be exited efficiently. Engagements are with firms that have Founder Chairmen or CEOs, other blockholders thought to be supportive, and few outside directors. Engagements are conducted behind-the-scenes, without involving other shareholders, are strikingly successful, and result in cumulative abnormal returns of 8-10% when objectives are met. The fund outperforms benchmarks and we estimate that abnormal returns derive mostly from engagements rather than stock picking.

Keywords: shareholder activism, corporate governance, institutional investors, small-caps, IPOs

JEL Classification: G23, G32, G34

Suggested Citation: Suggested Citation

Pezier, Emmanuel and Volpin, Paolo F., Shareholder activism in small-cap newly public firms (November 10, 2023). Financial Analysts Journal, 2024, 80(2): 52-73., Available at SSRN: https://ssrn.com/abstract=3400918 or http://dx.doi.org/10.2139/ssrn.3400918