Hijacking the Corporate Narrative: Activist Open Letters and Management Disclosures

Posted: 10 Mar 2018 Last revised: 20 Mar 2020

See all articles by Ryan McDonough

Ryan McDonough

Rutgers Business School - Newark & New Brunswick

Jordan Schoenfeld

Dartmouth College - Tuck School of Business

Date Written: March 19, 2020

Abstract

Activist investors often release open letters that criticize a target's management and demand specific changes to corporate operations. Using hand-collected data, we find that these letters are significantly associated with stock price reactions, bid-ask spreads, and key corporate governance outcomes such as directorships, operational changes, and proxy advisor recommendations. We also find that these letters are associated with increased management disclosures. Overall, this study provides some of the first evidence on how shareholders use public disclosure for corporate governance purposes.

Keywords: Corporate Disclosure; Corporate Governance; Information Asymmetry; Investment Funds; Shareholder Activism

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

Suggested Citation

McDonough, Ryan and Schoenfeld, Jordan, Hijacking the Corporate Narrative: Activist Open Letters and Management Disclosures (March 19, 2020). 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)

Dartmouth College - Tuck School of Business ( email )

Hanover, NH 03755
United States

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