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Activism of Institutional Investors, Corporate Governance Alerts and Financial Performance

22 Pages Posted: 7 Jan 2011  

Jean-Michel Sahut

IPAG Business School

Jean-Sebastien Lantz

Ecole Nationale Superieure des Telecommunications

Sophie Montandrau

IAE of Aix en Provence

Date Written: January 6, 2011

Abstract

Institutional investors are predominant on the financial markets and are becoming more active in their portfolio management. This article attempts to enhance our understanding of the incidence of shareholder activism on market reaction in the wake of several previous American studies.

Since 1999, SBF120 companies in France that do not respect the "Code of Best Practices on Corporate Governance as set out by the AFG" are added to a widely circulated "target list." The aim of this article is to examine the impact of the activism of institutional investors on shareholder wealth in France. Our empirical study examines the AFG alerts on financial performance, using a short-term event study methodology.

Our findings indicate a negative effect on the wealth of shareholders on the day of the alert. These results lead us to believe that the impact depends on past performance measured by book ratios or expressed in relation to the future premium opportunity for shareholders.

Suggested Citation

Sahut, Jean-Michel and Lantz, Jean-Sebastien and Montandrau, Sophie, Activism of Institutional Investors, Corporate Governance Alerts and Financial Performance (January 6, 2011). International Journal of Business, Vol. 15, No. 2, 2010. Available at SSRN: https://ssrn.com/abstract=1735797

Jean-Michel Sahut (Contact Author)

IPAG Business School ( email )

184 BD Saint Germain
Paris, 75006
France

Jean-Sebastien Lantz

Ecole Nationale Superieure des Telecommunications ( email )

46, rue Barrault
Paris Cedex 13, F-75634
France

Sophie Montandrau

IAE of Aix en Provence ( email )

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