Reputation and Investor Activism: A Structural Approach

Travis L. Johnson, McCombs School of Business, The University of Texas at Austin, Nathan Swem, Board of Governors of the Federal Reserve System
<span title="2020-10-15">2020</span> <i title="Board of Governors of the Federal Reserve System"> <a target="_blank" rel="noopener" href="" style="color: black;">Finance and Economics Discussion Series</a> </i> &nbsp;
We measure the impact of reputation for proxy fighting on investor activism by estimating a dynamic model in which activists engage a sequence of target firms. Our estimation produces an evolving reputation measure for each activist and quantifies its impact on campaign frequency and outcomes. We find that high reputation activists initiate 3.5 times as many campaigns and extract 85% more settlements from targets, and that reputation-building incentives explain 20% of campaign initiations and
more &raquo; ... % of proxy fights. Our estimates indicate these reputation effects combine to nearly double the value activism adds for target shareholders.
<span class="external-identifiers"> <a target="_blank" rel="external noopener noreferrer" href="">doi:10.17016/feds.2017.036r1</a> <a target="_blank" rel="external noopener" href="">fatcat:yvqnel3t4bbilfto5gp3mznkcy</a> </span>
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