Reputation and Investor Activism: A Structural Approach

59 Pages Posted: 18 Mar 2019

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: March 6, 2019

Abstract

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

Suggested Citation

Johnson, Travis L. and Swem, Nathan, Reputation and Investor Activism: A Structural Approach (March 6, 2019). Available at SSRN: https://ssrn.com/abstract=3347501 or http://dx.doi.org/10.2139/ssrn.3347501

Travis L. Johnson (Contact Author)

The University of Texas at Austin ( email )

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

HOME PAGE: http://travislakejohnson.com

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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