Activism in UK small-cap stocks

57 Pages Posted: 12 Jun 2019 Last revised: 11 Dec 2020

See all articles by Emmanuel Pezier

Emmanuel Pezier

City University London - Sir John Cass Business School

Paolo F. Volpin

City University London - Faculty of Finance; Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI)

Date Written: December 11, 2020

Abstract

Activists appear to play an important governance role, but identifying it empirically remains challenging. We examine a private dataset of engagements in small UK companies in the 2008- 15 period. Our activist receives a blind portfolio; has low incentives and financial resources; engages alone, behind-the-scenes; and deals in illiquid under-researched firms. These features help us to focus on the treatment (as compared to the selection) effect. Consistent with a positive governance effect of shareholder activism, we find that the engagements generate positive annual returns for the period (+1.4%), especially in confrontational situations (+4.9%), and have persistent impacts on firms’ operating performance.

Keywords: shareholder activism, corporate governance, institutional investors

JEL Classification: G23, G34

Suggested Citation

Pezier, Emmanuel and Volpin, Paolo F., Activism in UK small-cap stocks (December 11, 2020). Available at SSRN: https://ssrn.com/abstract=3400918 or http://dx.doi.org/10.2139/ssrn.3400918

Emmanuel Pezier (Contact Author)

City University London - Sir John Cass Business School ( email )

106 Bunhill Row
London, EC1Y 8TZ
United Kingdom

Paolo F. Volpin

City University London - Faculty of Finance ( email )

London, EC2Y 8HB
Great Britain

Centre for Economic Policy Research (CEPR)

London
United Kingdom

European Corporate Governance Institute (ECGI)

c/o ECARES ULB CP 114
B-1050 Brussels
Belgium

HOME PAGE: http:/www.ecgi.org

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