Public Pension Fund Activism and Firm Performance

Posted: 13 Sep 1999

See all articles by Sunil Wahal

Sunil Wahal

Arizona State University (ASU) - Finance Department

Date Written: November 1994


This paper studies the efficacy of pension fund activism and the ability or willingness of these funds to vote with their feet. I examine all firms targeted by nine major funds over a seven year period (1987-1993). Targeting announcements are associated with a small but significant wealth effect for a subset of firms. However, there is no evidence of improvement in the long-term stock price performance of targeted firms. In fact, performance continues to decline even three years after targeting. Moreover, in contrast to other institutions, pension funds do not appear to significantly reduce their holdings in underperforming firms in general, or in firms that they target. Collectively, the results cast doubt on the effectiveness of public pension fund activism as a substitute for an active market for corporate control.

JEL Classification: G30, G23

Suggested Citation

Wahal, Sunil, Public Pension Fund Activism and Firm Performance (November 1994). Available at SSRN:

Sunil Wahal (Contact Author)

Arizona State University (ASU) - Finance Department ( email )

W. P. Carey School of Business
PO Box 873906
Tempe, AZ 85287-3906
United States

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