Speaking With One Voice: Shareholder Collaboration on Activism
50 Pages Posted: 13 May 2020 Last revised: 24 Aug 2021
Date Written: May 8, 2020
Shareholder collaboration is critical for corporate governance. Developing a game-theoretic model, I analyze how an activist shareholder with small stakes organizes shareholder collaboration to govern a firm via intervention. The small activist must afford activism costs and win over passive shareholders simultaneously. By persuading fellow active shareholders to collaborate, the small activist can spread activism costs. However, collaborating with fellow active shareholders can jeopardize passive shareholders’ support. The interplay between collaborating with fellow active shareholders and winning over passive shareholders endogenizes the boundary of shareholder collaboration. Potential shareholder collaboration makes boards more likely to settle with activists before proxy fights.
Keywords: Collaboration, Shareholder Activism, Institutional Shareholders, Communication
JEL Classification: G34, D83, G23
Suggested Citation: Suggested Citation