Myopic Investor Myth Debunked: The Long-Term Efficacy of Shareholder Advocacy in the Boardroom

29 Pages Posted: 26 Jan 2015

See all articles by Shane Goodwin

Shane Goodwin

Oklahoma State University - Stillwater

Akshay Singh

Oklahoma State University

Walter Slipetz

Oklahoma State University - Stillwater

Ramesh P. Rao

Oklahoma State University - Stillwater - Spears School of Business - Department of Finance

Date Written: September 14, 2014

Abstract

Over the past two decades, hedge fund activism has emerged as new form of corporate governance mechanism that brings about operational, financial and governance reforms to a corporation. Many prominent business executives and legal scholars are convinced that the entire American economy will suffer unless hedge fund activism with its perceived short-termism agenda is significantly restricted. Shareholder activists and their proponents claim they function as a disciplinary mechanism to monitor management and are instrumental in mitigating the agency conflict between managers and shareholders. We find statistically meaningful empirical evidence to reject the anecdotal conventional wisdom that hedge fund activism is detrimental to the long term interests of companies and their long term shareholders. Moreover, our findings suggest that hedge funds generate substantial long term value for target firms and its long term shareholders when they function as a shareholder advocate to monitor management through active board engagement.

Suggested Citation

Goodwin, Shane and Singh, Akshay and Slipetz, Walter and Rao, Ramesh P., Myopic Investor Myth Debunked: The Long-Term Efficacy of Shareholder Advocacy in the Boardroom (September 14, 2014). Fourth Annual International Conference on Engaged Management Scholarship, September 2014. Available at SSRN: https://ssrn.com/abstract=2555701 or http://dx.doi.org/10.2139/ssrn.2555701

Shane Goodwin (Contact Author)

Oklahoma State University - Stillwater ( email )

Stillwater, OK 74078-0555
United States

Akshay Singh

Oklahoma State University ( email )

No Address Available

HOME PAGE: http://https://www.linkedin.com/in/singhakshay/

Walter Slipetz

Oklahoma State University - Stillwater ( email )

Stillwater, OK 74078-0555
United States

Ramesh P. Rao

Oklahoma State University - Stillwater - Spears School of Business - Department of Finance ( email )

Spears School of Business
Stillwater, OK 74078-4011
United States
405-744-1385 (Phone)
405-744-5180 (Fax)

Register to save articles to
your library

Register

Paper statistics

Downloads
166
Abstract Views
1,043
rank
181,093
PlumX Metrics