Shareholder Activism Research Articles

Does minority shareholder activism impede corporate default risk? Evidence from China

Different from the majority of research studying minority shareholder activism (MSA) on shareholder side, this study investigates the impact of MSA from the perspective of creditors. Based on annual data of listed firms on SSE and SZSE from 2010 to 2020, we find that MSA significantly mitigates corporate default risk through two ways: the “supervision” way and “good advice” way. Such inhibitory effect is strengthened by favorable institutional environment, board secretary concurrently serving as other executives, and board secretary response. Furthermore, we find that the supervision role of MSA is substitution for those of analysts and institutional investors. Our findings provide evidence for strengthening the protection of minority shareholders and encouraging their participation in firm affairs.

Under the spotlight: How media coverage impacts shareholder activism campaigns

This study provides novel evidence on the strategic role of media coverage in influencing shareholder activism campaigns. Analyzing a comprehensive dataset of activist interventions from 2000–2014, we find activists strategically target firms with high levels of recent business press coverage, especially negative coverage. These findings support theoretical predictions that activists prefer transparent, poorly performing firms. We also find a positive association between pre intervention press coverage and the likelihood an activism campaign receives coverage. This “sticky” media coverage effect suggests activists target visible firms to increase campaign exposure. Finally, using propensity score matching and regression analysis, we show activist campaigns receiving press coverage have significantly higher announcement returns, underscoring a key benefit of media coverage for activists. Overall, our results highlight the important interplay between media coverage, shareholder activists, and capital markets. The findings should interest managers seeking to assess activism risk and activists aiming to maximize campaign impact.

Shareholder Activism and ESG: From Locust to Green Knight? A Perspective From the Netherlands

Shareholder Activism and ESG: From Locust to Green Knight? A Perspective From the Netherlands

Is (institutional) shareholder activism new? Evidence from UK shareholder coalitions in the pre-Cadbury era

Is (institutional) shareholder activism new? Evidence from UK shareholder coalitions in the pre-Cadbury era

EFEITO DA PROPRIEDADE INSTITUCIONAL COMUM SOBRE O TUNNELING: EVIDÊNCIAS EMPÍRICAS DA CHINA

ABSTRACT This study examines the role of common institutional ownership (CIO) in reducing the tunneling behavior of controlling shareholders in Chinese listed companies. We empirically examined the influence of CIO on tunneling using a multiple regression model. The results show that CIO restrains tunneling, and the impact intensifies with an increase in CIO and a higher shareholding ratio. This effect is more pronounced in firms with poor information environments, low external supervision, non-state ownership, and a high degree of separation between ownership and control. We find that common institutional investors alleviate tunneling by using information advantage and engaging in shareholder activism. These results offer new evidence of the effect of common institutional investors on controlling shareholders’ behavior.

Is There a Premium for Sustainable Development Goals? The Case of Activist Investors

Is There a Premium for Sustainable Development Goals? The Case of Activist Investors

Reflection on the blockchain application in Chinese public health financial institutions governance

This paper identifies three aspects of challenges in blockchain practices through textual analysis and case studies in the governance of Chinese public health financial institutions. First, given the conflict of interest in corporate governance, under the background of shareholder activism, the attitude of controlling shareholders towards blockchain technology can become a crucial force in technology commercialization. Second, the massive amount of data derived from blockchain technology can lead to privacy protection problems in the financial development of the public health industry. Third, the lack of business customs can become a commercial factor hindering the application of blockchain technology. Therefore, reflecting on blockchain technology in corporate governance can facilitate the public health industry to adapt to the new opportunities brought by technological changes and cope with risks in advance. These findings are innovative and could provide insights into the future cross-border governance of blockchain technology.

이사책임감면제도 도입이 신용등급에 미치는 영향

[Purpose] This study investigates the impact of the introduction of the director’s Liability Limitation Provision(hereafter LLP) in firms on credit ratings. Furthermore, it examines how such impacts vary depending on the ownership stake and investment horizon of the National Pension Fund. [Methodology] We conduct empirical analysis using data from companies traded on the Korea Exchange from 2012 to 2017. The key findings are as follows. [Findings] Firstly, we find that firms introducing LLP tend to have lower credit ratings compared to those that do not introduce it. Secondly, when the National Pension Fund holds a substantial ownership stake (5% or more), LLP firms tend to have higher credit ratings than those that have not. Finally, when the National Pension Fund’s investment horizon is three years or more, there is a positive relationship between the introduction of LLP and credit ratings；however, such a relationship is not significant when the investment horizon is less than three years. [Implications] These results imply that the introduction of LLP can have a negative impact on corporate governance. Furthermore, it highlights the role of shareholder activism by the National Pension Fund, in mitigating these negative impact.

Do institutional investors affect corporate governance through proxy voting and shareholder activism? Evidence from India

PurposeThis study aims to examine the role of institutional investors (using proxy voting and voice) in influencing the decisions and governance landscape of their investee firms.Design/methodology/approachThe authors use exploratory research design due to the underdevelopment of the problem phenomena, especially in the context of emerging economies. Using asset management companies (AMC) as a proxy for institutional investors, the authors use a multiple case study design. This design was relevant in the setting as it assured triangulation by studying the same phenomenon across firms with distinct characteristics. The authors sourced the data for the multiple cases from primary sources (such as semi-structured interviews) and secondary sources (such as official Webpages and social media pages of AMC and examination of archival documents). Finally, the authors used qualitative content analysis to analyse the data.FindingsThe findings suggest that shareholder activism by institutional investors has grown in India over the period, particularly in matters related to corporate governance, related party transactions, remuneration and compensation. These AMC in India use proxy voting services for advising on voting resolutions in their investee companies. However, voting by AMC does not generally affect resolution results. This is particularly true in the presence of a high concentration of promoter holdings in investee companies.Originality/valueThe study is a novel attempt in an emerging market context to explore the role of institutional investors in influencing firm decisions and improving the governance landscape of the company using proxy voting and voice. This is especially important as the institutional framework in emerging markets is not as strong as in developed markets.

Minority shareholder activism and its ex-ante monitoring role in corporate M&A decisions: Evidence from China

Minority shareholder protection is especially important in countries with weak institutions. Prior studies indicate that social media facilitates minority shareholder activism by connecting otherwise isolated individual shareholders and increasing their bargaining power against the controlling shareholders. Whereas prior studies focus on the ex-post monitoring role of social media in corporate governance, we investigate whether and how minority shareholder social media engagement could deter insiders' entrenchment incentives in an ex-ante fashion. Specifically, using high merger premiums and private placement financing as proxies for activities that reflect insider entrenchment incentives in M&As, we find that greater social media engagement lowers M&A premiums and the likelihood of using private placement to benefit the controlling shareholders. This result holds after we control for the governance role of conventional media or analyst coverage, and institutional investors. Our mechanism analysis reveals that the effectiveness of social media in curbing entrenchment incentives in M&A is conditional on the perceived capital market consequences and the perceived likelihood of proposal vetoes. Further analysis shows that minority shareholder activism plays a greater role in curbing entrenchment in M&As when the minority shareholder sentiment expressed on social media is more negative and is more M&A-specific, as well as when social media facilitates higher quality discussions following an exogenous regulatory shock. We also find that minority shareholder activism is associated with better M&A performance. Our study highlights the ex-ante governance role of minority shareholder activism in weak institutions and informs regulators on the critical need to provide a platform for minority shareholders to effectively voice their concerns.

ESG and dividend distribution decisions: evidence of moderation by shareholder activism

Purpose Environment, social and governance (ESG) practices and shareholder activism are making significant strides in the decision-making policies and processes for all firms. This study aims to assess the impact of ESG on the dividend payout decisions of firms in India. In addition, it also aims to determine how shareholder activism influences the impact of ESG on dividend distribution decisions. Design/methodology/approach The authors gather relevant data from 78 non-financial listed Indian firms from 2016 to 2020. This study undertakes longitudinal data analysis, with fixed effects and calculation of robust standard errors. In addition, the slope test is used to examine the effects of the interaction between ESG and shareholder activism. Findings It is found in the study that not only does ESG positively impact the dividends but also shareholder activism positively impacts the dividend distribution decisions. Surprisingly, the authors see a significant but negative interaction impact of shareholder activism on the positive association of ESG with dividend distribution decisions. In other words, ESG impacts dividend distribution decisions differently at levels of shareholder activism. When shareholder activism is low, ESG positively influences dividend distribution decisions. However, when shareholder activism is high, ESG negatively influences dividend distribution decisions. Practical implications This result has significant implications for all the stakeholders, including shareholders. A shareholder expecting a dividend could decide correctly through the current study’s findings. In cases of high shareholder activism, investors may skip picking a stock if investors expect high ESG to influence the dividend distribution decisions favourably. On the contrary, investors may choose a stock if shareholder activism is low and all else remains the same. Originality/value Literature has some evidence of the influence of shareholder activism and ESG (in silos) on the dividend distribution decisions in the firms. This study attempts to contribute by bringing forth the interaction effects of shareholder activism and ESG on dividend distribution decisions.

Shareholder Activism in Small-Cap Newly Public Firms

We examine a private dataset of engagements by a UK fund in small-cap newly public firms. The fund inherits unwanted holdings from disparate investors and earns fees liquidating its portfolio. It considers activism only when blocks cannot be exited efficiently. Engagements are with firms that have founder chairpersons or CEOs, other blockholders thought to be supportive, and few outside directors. Engagements are conducted behind-the-scenes, without involving other shareholders, are strikingly successful, and result in cumulative abnormal returns of 8% to 10% when objectives are met. The fund outperforms benchmarks, and we estimate that abnormal returns derive mostly from engagements rather than stock picking.

Strategic CEO Activism in Polarized Markets

Abstract In this article, we show that statements of U.S. CEOs on contentious social issues are not necessarily an expression of their political views. Republican-donor CEOs are three times more likely to make social statements with a liberal slant. CEO activism is more likely if firms’ operating environment is politically polarized and employees are Democrat-leaning. Such statements are associated with a 3% increase in consumer visits to a firm’s Democrat County stores without significantly reducing them in Republican counties. CEO activism is associated with a 0.12% gain in firm value, increased quarterly sales, and a reduced likelihood of shareholder activism on social issues.

Shareholder Activism in Europe: A Rising Trend?

This article discusses the rising trend of shareholder activism in Europe. It summarizes the empirical evidence on different levels of shareholder activism across the world and offers three potential explanations for the higher level of shareholder activism in the US compared to continental Europe. First, the omnipresence of controlling shareholders in continental Europe could explain why shareholder activism is relatively less common. Secondly, higher levels of some types of shareholder activism environmental, social and governance (such as ESG shareholder activism) in the US can be explained by differences in corporate laws, in particular the relatively low thresholds to file shareholder proposals in the US. On the other hand, higher levels other types of shareholder activism (such as hedge fund activism) are more difficult to explain by differences in corporate law between the US and continental Europe. Third, more activist-friendly securities laws in the US could also explain why shareholder activism is relatively more common in the US than in continental Europe. Because these three explanatory factors are unlikely to change soon, the article concludes that the rising trend of shareholder activism in Europe is unlikely to reach American levels. shareholder activism, engagement, ESG activism, comparative company law

Research on Models of Corporate Governance Structure under Corporate Law in China

Shareholders tend to grant their power to the board of directors nowadays, namely they want to be investors instead of managers. At the same time, the Corporate Law of the Peoples Republic of China (henceforth referred to as Corporate Law) is amending now, which proposes to change the corporate governance structure model. The second draft of the amendment was promulgaged on 30th December 2022. Compared with the first draft, the legislative body has changed its views about the boards authority, a general item before, to provide an enumerated item. In other words, this law sticks to the shareholders meetings centralism model instead of the board centralism model. This article argues that the limited board centralism model that combines the board centralism model and offensive shareholder activism is more suitable for China. Professional employees must maintain the daily operation of Chinese companies and expand the boards authority to protect shareholders rights items in the law. This paper will explain the idea of limited board centralism and explain why it could suit China and the effect of applying it in practice by comparing it with foreign laws.

Does minority shareholder activism reduce stock idiosyncratic risk?

Using the China Securities Investors Services Center (CSISC) shareholding as an exogenous shock, this study investigates the impact of minority shareholder activism on idiosyncratic risk. The results show that minority shareholder activism reduces idiosyncratic risk. Firms with lower conditional accounting conservatism, a lower ratio of shares held by institutional investors, or a larger ratio of shares held by managers experience a greater reduction in idiosyncratic risk after the CSISC shareholding. It suggests that minority shareholder activism has a governance effect on constraining insiders’ information management behavior and improving information disclosure, through which idiosyncratic risk decreases. Furthermore, the idiosyncratic risk decreases after the CSISC exercises its rights by attending shareholder meetings. The difference in idiosyncratic risk between firms vanishes after the shareholding pilot program expands to the entire capital market. Finally, we find that the CSISC has a demonstration effect on encouraging other minority shareholders to participate in shareholder meetings.

Aktivistisch Investierende und ihre Einflussnahme auf Unternehmen

Abstract The growing presence of activist investors in Germany challenges companies with a confrontational style and broad demands. This article analyses the Anglo-American capital market phenomenon in the context of companies’ corporate governance and their shareholder structure. We examine the valuation effects of activist campaigns using share price reactions. The short-term announcement returns surrounding activist campaigns are positive and statistically significant. The mean abnormal share price return amounts to 3.96%. The results can be attributed to a combination of transaction and information effects.

Film work of the Samara Provincial Community of Consumer Cooperatives in 1926–1928

The article deals with the film work of the Samara Provincial Community of Consumer Cooperatives in 1926–1928. The relevance of the research topic lies in the fact that, using the example of the activities of the regional cooperative union for film services to the population, it is possible to identify social factors and mechanisms of sociocultural dynamics. As a source, the materials of the magazines «Sower of Truth» of the Samara Provincial Community of Consumer Cooperatives and «Cooperative Way» of the Middle Volga Regional and District Union of Consumer Cooperatives were used. The magazines published announcements of films, announcements about the route of film shifts, instructors’ reports on film flights, and reviews from viewers. The main scientific problem is to study the ways of organizing cinema services and the results of the work of cooperative movements of the Samara Provincial Union of Consumer Cooperatives. The research methodology is based on the theory of communication. For an objective quantitative analysis of the content of communication, content analysis is used. Narrative, historical-genetic, historical-comparative, typological methods of scientific knowledge were also used. In the course of the study, it was possible to find out that the Samara cooperators used a competent strategy to attract viewers, relying on active shareholders who fully paid their share contributions, subscribers of the Sower of Truth magazine. During film screenings, before and after the films were shown, new members of the cooperatives and subscribers of the Sower of Truth magazine were recruited, and share contributions were accepted. This policy of the Gubernia Union provided a return on the rental of tapes and film flights. The organization of movie nights was linked to various socio-political and cooperative educational campaigns.

Corporate governance at Pinterest: time for more changes?

Research methodology Data for the case came from public sources, including legal proceedings, court filings, company press releases and Securities and Exchange Commission filings. Case overview/synopsis In June 2020, former Pinterest employees made public charges of gender and racial discrimination. Despite changes implemented by the company, several Pinterest shareholders filed derivative lawsuits charging the company with breach of fiduciary duty, waste of corporate assets, abuse of control and violating federal securities laws. The case provides an overview of the company’s management, board and stock structures, as well as information on the shareholders who sued the company and their concerns. The case raises substantial questions about management’s and board member’s responsibilities in corporate governance, illustrates how stock structures can be used to impede governance and suggests ways to evaluate activist shareholders. Complexity academic level This case is appropriate for graduate, advanced undergraduate or executive education courses in strategy, corporate governance or strategic human resources that discuss corporate governance, fiduciary responsibilities, designing workplace culture or management responses to shareholders. Instructors can apply two sets of theories and frameworks to this case: theories of corporate governance and Hirschman’s (1970) exit, voice or loyalty framework in the context of shareholder activism.

Indigenous activism debut in Brazil: the case of Rumo

Learning outcomes By the end of the case study discussion, it is expected that students will have learned to assess what makes it likely that firms will respond to episodes of stakeholder activism; establish the interplay between nonmarket strategies and corporate governance mechanisms in assessing shareholder activism; explain about the board of directors as a corporate governance mechanism; evaluate the threats of nonmarket dimensions as a strategic response from the board; and understand the impact and increasing power of shareholders over board decisions. Case overview/synopsis In April 2019, to pressure Rumo S.A. regarding the duplication of the Itirapina–Cubatão railroad, indigenous peoples from 12 São Paulo villages bought six Rumo shares, which were quoted on Tuesday, April 23, 2019, at around BRL17 each. Duplication of the railroad started in 2011 and affected the lives of the Indians. The company promised to implement more than 100 improvements to the villages, but as of 2019, half of the improvements were at a standstill. After buying enough shares to entitle them to participate in the annual general meeting (AGM) of shareholders, the Indians went to Rumo’s AGM to voice their concerns and show how the villages had been affected. It was the audit committee that needed to discuss and solve the case of the indigenous peoples. What steps would Rumo take next? What was the best thing to do with regard to the claims of the Indians? This case shows the start of corporate activism in Brazil. This case reports the dilemma that Rumo faced with the indigenous activism at the beginning of 2019 because of the expansion of their railroad network across indigenous lands. Complexity academic level This case is suited for a class in which the students are exposed to a corporate governance framework and internal and external governance mechanisms. The case can be applied at the graduate and executive levels in relevant courses such as corporate governance, corporate responsibility, strategic management, and the stock market. Supplementary material Teaching notes are available for educators only. Subject code CSS 11: Strategy.