Quasi-Insider Shareholder Activism: Corporate Governance at the Periphery of Control

45 Pages Posted: 4 Apr 2017 Last revised: 22 May 2019

See all articles by Jonathan B. Cohn

Jonathan B. Cohn

University of Texas at Austin

Mitch Towner

University of Arizona - Department of Finance

Aazam Virani

University of Arizona - Department of Finance

Date Written: May 20, 2019

Abstract

We document the role of investors at the periphery of control - "quasi-insiders" - in corporate governance. These agents, who include founders, former CEOs, and other former officers, launch activist campaigns in smaller and worse-performing firms than traditional hedge fund activists, and use aggressive tactics to seek greater control. Their campaigns are associated with positive abnormal returns larger than those in hedge fund campaigns and subsequent improvements in operating performance. The presence of a quasi-insider as a blockholder is associated with a significant increase in CEO turnover-performance sensitivity. Overall, our results suggest that quasi-insiders play a meaningful role in governance.

Keywords: Shareholder Activism, Corporate Governance, Insiders, Hedge Funds, Institutional Investors

JEL Classification: G23, G30, G32, G34

Suggested Citation

Cohn, Jonathan B. and Towner, Mitch and Virani, Aazam, Quasi-Insider Shareholder Activism: Corporate Governance at the Periphery of Control (May 20, 2019). Available at SSRN: https://ssrn.com/abstract=2945613 or http://dx.doi.org/10.2139/ssrn.2945613

Jonathan B. Cohn

University of Texas at Austin ( email )

Red McCombs School of Business
Austin, TX 78712
United States
512-232-6827 (Phone)

Mitch Towner (Contact Author)

University of Arizona - Department of Finance ( email )

1130 E. Helen Street
Office 315K
Tucson, AZ 85721-0108
United States

HOME PAGE: http://www.mitchtowner.com

Aazam Virani

University of Arizona - Department of Finance ( email )

McClelland Hall
Tucson, AZ 85721-0108
United States

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