Reputation and Investor Activism
52 Pages Posted: 12 Sep 2015 Last revised: 17 Apr 2018
Date Written: April 4, 2018
We show that reputation plays a key role in the success of activist campaigns. We model reputation as target managers' belief about the activist's willingness to initiate a proxy fight. In our model, managers "settle" with high reputation activists by making changes to corporate policy without a proxy fight. We present empirical evidence supporting our model's predictions: managers more frequently raise payouts, replace CEOs, add or replace board members, engage in a merger or acquisition, and initiate restructurings without proxy fights when targeted by high reputation activists.
Keywords: Reputation, investor activism, governance, hedge funds, proxy fights
JEL Classification: G23, G34, G35
Suggested Citation: Suggested Citation