Researchers and investors disagree over the extent to which shareholder activism
facilitates improvements in target firms' values, earnings, operations, and governance
structures. The disagreement persists despite numerous empirical studies on the topic. In
this paper I survey the recent empirical research on shareholder activism, and conclude
that the disagreement among researchers is more apparent than real. Most evidence
indicates that shareholder activism can prompt small changes in target firms' governance
structures, but has negligible impacts on share values and earnings.
To be sure, some empirical results are mixed. But much of the disagreement among
researchers reflects differences in the metrics emphasized. Researchers emphasizing
changes in target firms' governance structures tend to characterize shareholder activism
as a "successful" tool to improve firm performance. Most of those emphasizing changes
in share values, earnings, or operations, in contrast, characterize shareholder activism as
having negligible effects on target companies. |