Voluntary Disclosure by Activist Shareholders

43 Pages Posted: 10 Mar 2018 Last revised: 15 Aug 2018

Ryan McDonough

Rutgers Business School - Newark & New Brunswick

Jordan Schoenfeld

Georgetown University, McDonough School of Business

Date Written: August 15, 2018

Abstract

Corporate governance theory models activists as privately informed minority stakeholders who use persuasion over other investors to enact their agendas at their target firms. Consistent with this idea, we find that activists frequently release open letters aimed at other investors that are associated with significant stock price movements, decreased bid-ask spreads, and key activism outcomes such as directorship wins, strategic shifts, and proxy advisor recommendations. Managers commonly respond to activists' letters, thus creating a public debate about their firm's future. These findings suggest that activists use open letters to inform other investors and facilitate change at their targets.

Keywords: Information Asymmetry; Shareholder Activism; Voluntary Disclosure

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

Suggested Citation

McDonough, Ryan and Schoenfeld, Jordan, Voluntary Disclosure by Activist Shareholders (August 15, 2018). Georgetown McDonough School of Business Research Paper No. 3137216. 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)

Georgetown University, McDonough School of Business ( email )

3700 O Street, NW
Washington, DC 20057
United States

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