Pension Fund Activism and Firm Performance

JOURNAL OF FINANCIAL AND QUANTITATIVE ANALYSIS, March 1996

Posted: 27 Jun 1998

See all articles by Sunil Wahal

Sunil Wahal

Arizona State University (ASU) - Finance Department

Abstract

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

Wahal, Sunil, Pension Fund Activism and Firm Performance. JOURNAL OF FINANCIAL AND QUANTITATIVE ANALYSIS, March 1996, Available at SSRN: https://ssrn.com/abstract=7477

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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