Investor Relations, Engagement, and Shareholder Activism

The Accounting Review, Forthcoming

52 Pages Posted: 27 Apr 2021 Last revised: 22 Jan 2022

See all articles by Kimball Chapman

Kimball Chapman

Washington University in St. Louis - John M. Olin Business School

Gregory S. Miller

University of Michigan, Stephen M. Ross School of Business

Jed Neilson

Pennsylvania State University

Hal D. White

University of Notre Dame

Date Written: February 5, 2021

Abstract

A dedicated investor relations (IR) function facilitates direct and ongoing dialogue between management and shareholders. This paper examines whether this form of engagement mitigates activism that relies upon support from other shareholders. We find that IR engagement is associated with increased investor confidence in management and the board, as well as a lower likelihood of activism, with this deterrent effect becoming stronger when there are fewer frictions surrounding the development of mutual understanding and trust with investors. We also find that when firms do experience an activist campaign, firms with IR engagement have less costly and contentious campaigns, including a lower likelihood of CEO turnover, than those without such a commitment. Taken together, our findings suggest that direct and ongoing IR engagement is an important factor in achieving mutual understanding and trust between the firm and its shareholders, which deters activist investors and mitigates the costly escalation of initiated campaigns.

Keywords: Shareholder Activism, Shareholder Engagement, Investor Relations, Corporate Governance

JEL Classification: G10, G32, G34, M40, M41

Suggested Citation

Chapman, Kimball and Miller, Gregory S. and Neilson, Jed and White, Hal D., Investor Relations, Engagement, and Shareholder Activism (February 5, 2021). The Accounting Review, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3834544 or http://dx.doi.org/10.2139/ssrn.3834544

Kimball Chapman

Washington University in St. Louis - John M. Olin Business School ( email )

One Brookings Drive
Campus Box 1133
St. Louis, MO 63130-4899
United States

Gregory S. Miller

University of Michigan, Stephen M. Ross School of Business ( email )

701 Tappan Street
Ann Arbor, MI MI 48109
United States

Jed Neilson (Contact Author)

Pennsylvania State University ( email )

University Park
State College, PA 16802
United States
8148650327 (Phone)

HOME PAGE: http://directory.smeal.psu.edu/jjn12

Hal D. White

University of Notre Dame ( email )

389C Mendoza College of Business
University of Notre Dame
Notre Dame, IN 46556
United States
574-361-3809 (Phone)

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