Reputation and Investor Activism

57 Pages Posted: 7 Apr 2017

See all articles by Travis L. Johnson

Travis L. Johnson

The University of Texas at Austin

Nathan Swem

Board of Governors of the Federal Reserve System

Date Written: 2017-02


We show that an activist's reputation is a critical determinant of the success of their campaigns. We model reputation as target managers' belief about the activist's willingness to initiate a proxy fight. Our model indicates reputation, rather than stake size, induces managers to settle without a proxy fight. We present empirical evidence supporting our model's predictions: target companies more-frequently increase payouts, change management or board composition, engage in a merger or acquisition, or otherwise reorganize in response to high reputation activist campaigns, while target actions are not sensitive to the activist's stake size.

Keywords: Corporate Governance, Hedge Funds, Investor Activism, Reputation

JEL Classification: G23, G34, G35

Suggested Citation

Johnson, Travis L. and Swem, Nathan, Reputation and Investor Activism (2017-02). FEDS Working Paper No. 2017-036, Available at SSRN: or

Travis L. Johnson (Contact Author)

The University of Texas at Austin ( email )

2110 Speedway Stop B6600
Austin, TX Texas 78712
United States
6178995325 (Phone)


Nathan Swem

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

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