Does Coordinated Institutional Activism Work? An Analysis of the Activities of the Council of Institutional Investors

Dice Center For Research In Financial Economics, Working Papers Series 95-5

29 Pages Posted: 22 Jul 1996  

Tim C. Opler

Credit Suisse First Boston

Jonathan S. Sokobin

FINRA

Abstract

The Council of Institutional Investors is a group of public and private pension funds which collectively own over $800 billion in financial assets within the United States. The Council has provided a forum for these funds to coordinate and communicate with each other on a variety of matters including activism programs aimed at facilitating solution of problems in underperforming portfolio firms. The Council has issued a focus list of poorly performing firms for each of the last five years to its members who have the discretion to pursue activism programs. These lists have included well-publicized underperformers such as IBM, Kodak and Sears along with a variety of less known cases. This study documents the performance of 96 firms which appeared on the Council's focus lists in 1991, 1992 and 1993 relative to several control groups. Firms on Council focus lists experience poor share price performance in the year before being included on a focus list. In the year after being listed, these firms experienced an average share price increase of 11.6% above the S&P 500. Given that the mean equity market value of Council listed firms was $3.42 billion we estimate a total abnormal dollar gain of these firms of $39.7 billion. This increase is broadly consistent with the view that coordinated institutional activism creates shareholder wealth.

JEL Classification: G39

Suggested Citation

Opler, Tim C. and Sokobin, Jonathan S., Does Coordinated Institutional Activism Work? An Analysis of the Activities of the Council of Institutional Investors. Dice Center For Research In Financial Economics, Working Papers Series 95-5. Available at SSRN: https://ssrn.com/abstract=46880 or http://dx.doi.org/10.2139/ssrn.46880

Tim C. Opler (Contact Author)

Credit Suisse First Boston ( email )

11 Madison Avenue
Investment Banking Div., 23rd Flr
New York, NY 10010
United States
(212) 328-5313 (Phone)
(212) 448-3410 (Fax)

Jonathan Sokobin

FINRA ( email )

1735 K Street NW
Washington, DC 20006-1506
United States
(202) 728-8248 (Phone)
(301) 527-4809 (Fax)

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