Activist investor disclosures and firms' information environments

53 Pages Posted: 10 Mar 2018 Last revised: 15 Sep 2021

See all articles by Ryan McDonough

Ryan McDonough

Rutgers Business School - Newark & New Brunswick

Jordan Schoenfeld

University of Utah; Dartmouth College - Tuck School of Business

Date Written: September 14, 2021

Abstract

Recent theories of shareholder governance predict that large activist investors will make voluntary public disclosures to persuade the board and other investors that implementing their ideas is beneficial to the target firm. We test this prediction using one of the first large-scale datasets of activists' voluntary disclosures about public firms. We find that these disclosures are widely adopted by activists and significantly associated with positive abnormal returns, decreases in bid-ask spreads, and increases in disclosure at the target firms. Additional tests suggest that these findings are justified as the targets of activist disclosures do in fact implement governance changes and improve their performance ex post. Overall, our evidence empirically supports the disclosure prediction of recent governance theories, and highlights a new link between large investors and firms' information environments.

Keywords: Activism; Corporate Disclosure; Corporate Governance; Information Asymmetry

JEL Classification: D21, G30, G32, G34, K22, L22

Suggested Citation

McDonough, Ryan and Schoenfeld, Jordan and Schoenfeld, Jordan, Activist investor disclosures and firms' information environments (September 14, 2021). Available at SSRN: https://ssrn.com/abstract=3137216 or http://dx.doi.org/10.2139/ssrn.3137216

Ryan McDonough

Rutgers Business School - Newark & New Brunswick ( email )

100 Rockafeller Road
Piscataway, NJ 08854-8054
United States

Jordan Schoenfeld (Contact Author)

University of Utah ( email )

1645 E. Campus Center
Salt Lake City, UT 84112
United States

Dartmouth College - Tuck School of Business ( email )

Hanover, NH 03755
United States

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