Shareholder Activism Research Articles

Tax clientele and share repurchase execution

This study hypothesizes that low-tax clientele firms are reluctant to engage in share repurchases because their shareholders’ dividend tax penalty is less than the expropriation of strategic trading in share repurchases. As a result, firms formed by low-tax clientele execute share repurchases in a cost minimization strategy when they consider the tax status of most of their shareholders. Using novel data from Taiwan, this research finds that, compared to high-tax clientele firms, low-tax clientele firms tend to use market timing skills to repurchase stocks and get a larger price discount in the repurchase execution. The findings enrich the dividend tax penalty and market timing literature and offer practical implications for shareholder activism.

Private equity firm Apollo to buy distributor Univar

The private equity firm Apollo has agreed to acquire Univar Solutions, the world’s third-largest chemical distributor, for $8.1 billion. Univar has been in play since late November, when it and the world’s largest chemical distributor, Brenntag, disclosed that they were discussing a possible merger. The firms called off those talks in January , with Univar remarking that it was evaluating “other indications of interest” from possible buyers. Funds managed by Apollo will pay $36.15 per share for Univar, a premium of about 20% over Univar’s stock price on Nov. 22, before the market became aware of the merger talks. Engine Capital, an activist investor that owns 1% of Univar’s stock, has been prodding Univar’s management to market the company for sale. However, Engine had been hoping to get a price of between $38 and $44 per share for the firm. “We are confident this transaction is the right path forward,”

Does minority shareholder activism enhance corporate innovation? Evidence from China

Minority shareholder activism (MSA) on online interactive platforms is a novel form of corporate governance in China. This paper investigates whether, and how, innovation-related minority shareholder activism affects corporate innovation. We find that MSA is significantly positively related to firms’ future innovation output. We establish a causal relationship between MSA and future innovation output using both instrumental variable and propensity score matching approaches. We further find that MSA's governance effect on innovation is consistent with career concerns rather than the quiet life hypothesis. Additionally, we find that MSA's effects substitute for institutional investor activism's effects.

Have Faith in Business: Nestlé, Religious Shareholders, and the Politicization of the Church in the Long 1970s

During the 1970s, religious activists were heavily involved in national and international campaigns against multinationals and urged firms to adapt their behavior to align with Christian ethics. This article analyzes the strategies of Nestlé in addressing religious activism at three levels: national, international, and organizational. The analysis examines Nestlé’s collaboration with other Swiss and European multinationals and high-ranking church representatives in establishing dialogue platforms that sought to improve mutual understanding and promote tolerance for global capitalism. Nestlé also contributed to the creation of guidelines for the main churches in Switzerland that were aimed at their partial depoliticization. When Nestlé’s executives faced religious shareholder activists during its shareholders’ annual general meetings, they chose to engage with them to avoid their radicalization, although most of their demands ultimately remained unanswered. Overall, Nestlé contributed to the reorientation of religious discussions to small-scale ethical problems and business self-regulation rather than to substantial reforms of the capitalist economic system.

Proxy solicitation, ownership structure, and bank cash dividends

The system of proxy solicitation is designed to alleviate the agency cost. The cash dividend policy involves the agency problem, which is particularly important in the banking sector. This study examines how proxy solicitation and ownership structure affect bank cash dividends. We find proxy solicitation is positively correlated with dividends, while the interactions between proxy solicitation and ownership structure negatively affect dividends. These results imply proxy statements display shareholder activism to some extent. However, when banks with high CEO, director, and government ownership solicit proxies as a means to smoothly reduce dividends, proxy solicitation becomes inefficient in shareholder activism.

RECENT CHANGES IN CORPORATE GOVERNANCE AND ITS IMPACT ON CORPORATE AMERICA

ABSTRACT Recent changes to corporate governance have affected the areas of environmental awareness, corporate strategy, managerial accountability, compensation, board structure and shareholder rights. Reasons for these changes to corporate governance include new rules from the U.S. Securities & Exchange Commission, changes in society, and increased shareholder activism. This paper explains how recent changes in corporate governance have led to Corporate America putting more focus on corporate social responsibility activities, firms seeking to diversify their boards of directors, and shareholders using their interests to shape how firms operate. Subsequently, this paper will examine what future changes to corporate governance may come and then conclude with a summary of the impact on Corporate America. Keywords Corporate Governance, Corporate Social Responsibility, Diversity of Board of Directors

Brenntag faces activist pressure

Brenntag, the world’s largest chemical distributor, is being pressured by a second activist investor to break up the company. In a letter to Brenntag management, Engine Capital, which owns 1% of Brenntag’s shares, says the company’s specialties unit has been underperforming relative to peers. Engine is calling for the business, which has annual sales of about $6.4 billion, to be spun off. The investor notes that specialty chemical distribution requires emphasis on technical services and applications development, unlike the balance of Brenntag, which focuses on bulk commodities. The firm’s management heard a similar argument in December from PrimeStone; that investor urged the firm to end merger talks with rival Univar Solutions.

Impact of Financial Distress on the Dividend Policy of Banks in India

The present study primarily examines the impact of financial distress (FD) on the dividend policy of 33 banks working in the Indian economy from 2010 to 2019. In addition, we further explore the association between financial distress and dividend policy under the influence of shareholder activism (SHA). Using the static panel data regression technique, it is revealed that financial distress is non-linearly associated with the dividend policy of banks in an inverted U-shape. In the initial phase of a distressing situation, banks tend to have a liberal dividend policy. However, after reaching the pressure point, the banks start to squeeze dividend distribution to the stakeholders. Furthermore, the significant impact of shareholder activism has been found in the association between financial distress and the dividend payout policy of banks. From the policy perspective, the study will provide the policymakers with a clear all-round perspective of distressing situations, as the current research involves exploring the impact of distress on the dividend policy that will help the experts in basically understanding the adverse effect of financial distress and the repercussions, respectively, on the earning of the shareholders.

Political investorism in Australia: unnatural insiders and the insider/outsider dynamics of market lobbying

ABSTRACT Political lobbying in the marketplace in Australia has risen sharply in the last decade, with increased instances of shareholder activism and other forms of investment-based political participation, or ‘political investorism’. This article provides the first analysis of political investorism in the Australian context, utilising process-tracing and interviews to examine six case studies on issues including modern slavery, climate change, and human rights. We consider the insider and outsider dynamics of political investorism, and the factors that shape the manifestation of this tactic in Australia. We argue that political investorism in Australia is shaped primarily by structural factors including corporate governance rules and the power of superannuation (pension) funds. We demonstrate that some forms of political investorism defy neat categorisation as insider or outsider strategies, identifying a new category of ‘unnatural insider’ to describe the acquisition of insider status for the explicit purpose of pursuing political goals.

Impact of Shareholders’ Activism on the Performance of Banks in India: A Panel Data Application

There is a widespread uncertainty regarding the usefulness of shareholder activism (SA) as a part of corporate governance for firms and banks. SA has wide acceptance across the board among all the stakeholders’ participation. Since banks are the backbone of any economy, any endeavor (support to SA) creating difficulty may boomerang. Such actions do more harm than good; therefore, it is imperative to determine whether SA is beneficial to the banks or not. In this study, the SA index is built for Indian banks. The data relating to bank performance and valuation is gathered for 2016–2019. Panel data econometrics is applied to determine the impact of SA on banks performance. Results reveal that SA impacts bank performance. Furthermore, transparency and disclosure significantly moderates the association of SA with the performance. However, SA is not impacting bank valuation. It is a unique study of its kind to provide insights on SA for the banking sector.

When does a female leadership advantage exist? Evidence from SOEs in China

AbstractResearch Question/IssueWe approach the ongoing debate in the literature on when and why a female leadership advantage exists in the context of China. In particular, we examine whether female CEOs outperform male CEOs in state‐owned enterprises (SOEs).Research Findings/InsightsWe show that a female leadership advantage exists in SOEs. We find that the female leadership increased performance is attributed to improved profitability, capital structure, and operating efficiency. The magnitude of this gender effect is bigger in central state‐owned enterprises (CSOEs) than that in local state‐owned enterprises (LSOEs). The results are robust to additional tests that mitigate the sample selection and other endogeneity concerns.Theoretical/Academic ImplicationsWe use the role congruity theory to motivate and develop the hypotheses drawing insights upon the literature in psychology and leadership. Female CEOs are perceived as less congruent with their leadership roles given the gender role stereotypes. Thus, they face more challenges and difficulties than male CEOs. These obstacles take at least two forms which are significant in SOEs: shareholder activism and sex discrimination. Female CEOs have to outperform their male counterparts to alleviate the pressure from shareholder activism and showcase their managerial skills and abilities.Practitioner/Policy ImplicationsFor the state shareholders, the extra scrutiny in selecting female CEOs should be lifted given this outperformance. The evidence is also relevant for CEOs to choose their career paths among different types of firms, for boards of directors on their strategic decisions on CEO hiring, and for policy makers to promote the female leadership advantage.

Shareholder-initiated environmental and energy resolutions: too little too late?

PurposeGiven the urgency to address the climate change crisis, the purpose of this study was to investigate the impact of 12 macro-level antecedents on energy and environmental (E&E) shareholder activism in 12 developed countries. Focus was placed on shareholder-initiated E&E resolutions.Design/methodology/approachPanel regressions were used to evaluate the relationships between the macro-level antecedents and two dependent variables, namely, the number of shareholder-initiated E&E resolutions filed and voting support for these resolutions.FindingsThe number of shareholder-initiated E&E resolutions filed increased slightly over the research period (2010–2019) but received very little voting support on average. Most of the 1,116 considered resolutions centred on the adoption or amendment of nuclear and environmental policies. Several resolutions called for improved E&E reporting. A significant relationship was found between the number of shareholder-initiated E&E resolutions filed and the rule of law.Research limitations/implicationsThe empirical evidence confirmed limited voting support for shareholder-initiated E&E resolutions and the importance of the rule of law in advancing the E&E social movement.Practical implicationsAs the E&E social movement is gaining momentum, listed companies in the considered countries are likely to experience more pressure from shareholder activists.Social implicationsTo achieve participatory and inclusive climate governance, shareholder activists should collaborate more closely with other challengers in the E&E social movement, notably policy makers and those promoting the rule of law.Originality/valueThe authors considered macro-level antecedents of E&E shareholder activism that have received scant attention in earlier studies. Social movement theory was used as a novel theoretical lens.

Shareholder Activism and Firm Performance: A Review

The paper aims to review the literature on the influence of Shareholder Activism on firm performance including share price, financial performance, corporate governance, and innovation. Many studies have been reviewed to find the relationship between the identified constructs. For this purpose, the review methodology has been used to go through the literature relating to the impact of Shareholder Activism on Firm Performance over the period ranging from 2000 to 2021. Furthermore, the study concludes that shareholder activism significantly affects how well a company performs. However, studies claim that shareholder activism has a favorable impact on a company's performance, while other scholars claim that it has a detrimental effect. However, some researchers have found that the influence is minimal. Moreover, firm performance can be enhanced if a firm's management works in collaboration with activist investors.

Activist investors: A literature review on recent evidence

This study reviews, summarizes and synthesizes the most recent findings regarding activist investors. Based on a literature review framework we provide a multidimensional analysis synthesizing the state-of-the-art of activist investor attacks in global financial markets where activist investors increase their number of campaigns and expand their market scope over the last years significantly. For this purpose, 98 articles were identified discussing activist investors in the time period of 2018–2023. Out of this pool, only 25 studies explicitly examine the recent market activities, the strategies and the performance of activist investors. The analysis of the 25 studies reveals new trends of activist investors regarding their investment strategies such as targeting women-led firms and using open activism more frequently. Activists focus on enforcing demands for the sale of the company, changing management composition, influencing corporate governance, and a shift in the strategy of the target. Concerning the investment performance activist investors overall achieve positive abnormal returns. The financial performance of the target firms indicates an ambivalent picture: In the short term, their performance shows strong and poor financial results alike. In the long run, this divergence levels off indicating a more negative impact on financial performance resulting from activist investors.

When the Board of Directors Is Confronted by Activist Shareholders: The Case of Danone

When the Board of Directors Is Confronted by Activist Shareholders: The Case of Danone

Exclusive: RBC Analyst Weighs in on Icahn's Proxy Battle for Illumina

GEN EdgeVol. 5, No. 1 CompaniesExclusive: RBC Analyst Weighs in on Icahn's Proxy Battle for IlluminaConor McNamara, CFA, of RBC Capital Markets discusses the sequencing giant's war or words with the activist investor with GEN EdgeAlex PhilippidisAlex PhilippidisSearch for more papers by this authorPublished Online:6 Apr 2023https://doi.org/10.1089/genedge.5.1.54AboutSectionsView articleView Full TextPDF/EPUB Permissions & CitationsPermissionsDownload CitationsTrack CitationsAdd to favorites Back To Publication ShareShare onFacebookTwitterLinked InRedditEmail View articleFiguresReferencesRelatedDetails Volume 5Issue 1Jan 2023 Information© 2023 by GEN PublishingTo cite this article:Alex Philippidis.Exclusive: RBC Analyst Weighs in on Icahn's Proxy Battle for Illumina.GEN Edge.Jan 2023.287-294.http://doi.org/10.1089/genedge.5.1.54Published in Volume: 5 Issue 1: April 6, 2023PDF download

Shareholder Activism in India: Analysis of Shareholders’ Exercise of Their Corporate Franchise in General Meetings

Shareholder Activism in India: Analysis of Shareholders’ Exercise of Their Corporate Franchise in General Meetings

Perception and awareness levels of retail investors on corporate governance practices in an emerging economy.

Many criteria encompass the concept of corporate governance. There is an apprehension that it’s the non-retail investors who would be interested in such governance of firms rather than retail investors, as they hold a small fraction of ownership, usually being passive investors and not in a capacity to influence the management. This study is an attempt to understand the attitude and perception of retail investors in India toward corporate governance practices and for that purpose, a questionnaire was served to consist of a range of corporate governance factors. The data was studied through percentage analysis and chi-square was run. It was established, that retail investors pay attention to corporate governance factors, more importantly to the board of directors, this finding supports the results of Chakraborty et al. (2023). But there is no strong course of action that they prefer to resolve any of their governance-related issues. India, where promoter groups are dominant, has a long way to go to bring out shareholder activism at par with developed markets

Investor Activism and Green Transition

Investor Activism and Green Transition

Gene Therapy Briefs: Activist Investor Reported to Take $1B Stake in BioMarin

Gene Therapy Briefs: Activist Investor Reported to Take $1B Stake in BioMarin