Investor Activism Effects in Banking: Is Activism Beneficial for Bank Shareholders, Creditors, and the Public?
78 Pages Posted: 24 Sep 2014 Last revised: 9 Feb 2016
Date Written: December 2015
This paper conducts the first assessment of investor activism in banking and its effects on risk-taking and performance. It focuses on the conflicts among different bank stakeholders to understand whether activism is beneficial for these different parties. Using hand-collected data on shareholder activism, we find that activism is generally not a stabilizing force in banking, increasing bank risk-taking, but creating market value for shareholders, and leaving operating returns unaltered, consistent with the empirical dominance of the Shareholder-Creditor Conflict. However, activism is not a significant risk source during crises. From a public perspective, creditors (including the government in its role as a creditor) may lose during normal times, but not during crises.
Keywords: banking, shareholder activism, corporate governance, financial stability, financial crises
JEL Classification: G21, G28, G38, G01
Suggested Citation: Suggested Citation