Reputation and Investor Activism: A Structural Approach
59 Pages Posted: 18 Mar 2019
Date Written: March 6, 2019
We measure the impact of reputation for proxy fighting on investor activism by estimating a dynamic model in which activists engage a sequence of target firms. Our estimation produces an evolving reputation measure for each activist and quantifies its impact on campaign frequency and outcomes. We find that high reputation activists initiate 3.5 times as many campaigns and extract 85% more settlements from targets, and that reputation-building incentives explain 20% of campaign initiations and 19% of proxy fights. Our estimates indicate these reputation effects combine to nearly double the value activism adds for target shareholders.
Keywords: reputation, investor activism, governance, hedge funds, proxy fights, dynamic, structural estimation
JEL Classification: G23, G34, G35
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