Wolf Pack Activism

Abstract

Blockholder monitoring is key to good corporate governance, but blockholders large enough to exercise significant unilateral influence are rare. As a result mechanisms that enable small blockholders to exert collective influence are important. It is alleged that institutional blockholders (implicitly) coordinate when intervening in firms, with one acting as the “lead” activist and others as peripheral activists, or “wolf pack” members. We present a model of wolf pack activism. Our model formalizes a source of complementarity across the engagement strategies of activists and highlights the catalytic role played by the leader. We also characterize share acquisition by wolf pack members and the leader, providing testable implications on ownership and price dynamics in wolf pack formation.