Relationship Investing and Shareholder Activism by Institutional Investors: The Wealth Effects of Corporate Governance Related Proposals
Posted: 13 Sep 1999
We examine whether institutional investor activism by public pension funds is effective in achieving its stated goal of increasing shareholder value. An investigation of the short term performance indicates that there are significantly positive abnormal returns surrounding the targeting of firms for governance reform. In contrast, in an analysis of long term performance we find that the magnitude of the cumulated excess return varies depending on the specific benchmark portfolio employed. Moreover, we do not find any evidence of statistically significant positive returns. This leads us to question the effectiveness of this form of shareholder activism.
JEL Classification: G32
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