The Impact of Shareholder Activism on Target Companies: A Survey of Empirical Findings

Abstract

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.