Importing Activists: Determinants and Consequences of Increased Cross-border Shareholder Activism

Abstract

We analyze nearly 7,000 shareholder activist campaigns across 56 countries and show that shareholder activism is now a global phenomenon. Our analyses provide evidence on factors that explain the spread of activism and two related questions. First, we measure the extent to which country-level governance regulations facilitate shareholder engagement, a necessary condition for activism, and show that our measure of shareholder-empowering governance regulation explains cross-country variation in the emergence of activism. Second, we show that changes in these regulations also affect outcomes for firms that face a high threat of activism but that are not targeted by activists (i.e., there are spillovers)—including increased profitability, higher payouts, and reduced investment. These effects are most pronounced in countries with weak minority shareholder rights, where activism had previously been relatively unimportant.

Keywords: Shareholder Activism, Corporate Governance, Regulation, Real Effects

JEL Classification: F55, G38, K22, M48