The Costs of Shareholder Activism: Evidence from a Sequential Decision Model

54 Pages Posted: 22 Jul 2010 Last revised: 18 Sep 2012

See all articles by Nickolay Gantchev

Nickolay Gantchev

Southern Methodist University (SMU) - Finance Department; Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI)

Date Written: August 12, 2012


This paper provides benchmarks for monitoring costs and evaluates the net returns to shareholder activism. I model activism as a sequential decision process consisting of demand negotiations, board representation, and proxy contest and estimate the costs of each activism stage. A campaign ending in a proxy fight has average costs of $10.71 million. I find that the estimated monitoring costs reduce activist returns by more than two-thirds. The mean net activist return is close to zero but the top quartile of activists earns higher returns on their activist holdings than on their non-activist investments. The large-sample evidence presented in this paper aids in understanding the nature and evolution of activist engagements.

Keywords: Shareholder activism, Hedge funds, Institutional investors, Monitoring, Corporate Governance

JEL Classification: G23, G32, G34

Suggested Citation

Gantchev, Nickolay, The Costs of Shareholder Activism: Evidence from a Sequential Decision Model (August 12, 2012). Journal of Financial Economics (JFE), Forthcoming. Available at SSRN: or

Nickolay Gantchev (Contact Author)

Southern Methodist University (SMU) - Finance Department ( email )

United States
214-768-4128 (Phone)

Centre for Economic Policy Research (CEPR) ( email )

United Kingdom


European Corporate Governance Institute (ECGI) ( email )


Here is the Coronavirus
related research on SSRN

Paper statistics

Abstract Views
PlumX Metrics