Standing on the Shoulders of Giants: The Effect of Passive Investors on Activism / Ian R. Appel, Todd A. Gormley, Donald B. Keim.

Format:

Book

Author/Creator:

Appel, Ian R.

Contributor:

National Bureau of Economic Research.

Gormley, Todd A.

Keim, Donald B.

Series:

Working Paper Series (National Bureau of Economic Research) no. w22707.

NBER working paper series no. w22707

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Other Title:

Standing on the Shoulders of Giants

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2016.

Summary:

We analyze whether the growing importance of passive investors has influenced the campaigns, tactics, and successes of activists. We find activists are more likely to pursue changes to corporate control or influence (e.g., via board representation) and to forego more incremental changes to corporate policies when a larger share of the target company's stock is held by passively managed mutual funds. Furthermore, higher passive ownership is associated with increased use of proxy fights and a higher likelihood the activist obtains board representation or the sale of the targeted company. Overall, our findings suggest that the increasingly large ownership stakes of passive institutional investors mitigate free-rider problems associated with certain forms of intervention and ultimately increase the likelihood of success by activists.

Notes:

Print version record

September 2016.