Pension Fund Activism and Firm Performance
JOURNAL OF FINANCIAL AND QUANTITATIVE ANALYSIS, March 1996
Posted: 27 Jun 1998
This paper studies the efficacy of pension fund activism by examining all firms targeted by nine major funds from 1987 to 1993. I document a movement away from takeover-related proxy proposal targetings in the late 1980s to governance-related proxy proposal and non-proxy proposal targetings in the 1990s. For the vast majority of firms there are no significant abnormal returns at the time of targeting. The subset of firms subject to non-proxy proposal targeting, however, experience a significant positive wealth effect. There is no evidence of significant long-term improvement in either stock price or accounting measures of performance in the post-targeting period. Collectively, these results cast doubt on the effectiveness of pension fund activism as a substitute for an active market for corporate control.
JEL Classification: G23
Suggested Citation: Suggested Citation