Who are the activists? Investor characteristics and corporate improvements

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dc.contributor Aalto University en
dc.contributor Aalto-yliopisto fi
dc.contributor.author Davidkin, Joel
dc.date.accessioned 2011-11-14T11:23:38Z
dc.date.available 2011-11-14T11:23:38Z
dc.date.issued 2010
dc.identifier.uri https://aaltodoc.aalto.fi/handle/123456789/522
dc.description.abstract PURPOSE OF THE STUDY The conflicts of interest between owners and managers have spurred a great deal of research on shareholders’ potential ability to reduce agency costs in public corporations. Scholars, however, still disagree on which investors defy the free-rider problem and engage in valueadding activism. We develop a novel approach to identify activist investors based on their past investment behaviour and study where such owners improve their target companies. We depart from the existing literature and produce two alternative investor groupings based on portfolio concentration and investment horizon to predict propensity to activism. We examine how the investor groups relate to improvements in corporate governance, organisation and payout. DATA We study the effect of different investor types on large U.S. and European publicly traded firms, as included in the S&P 1500 Composite and the STOXX Europe TMI indices, during the years 2003 to 2009. The foundation of our study lays on an extensive panel database comprising three unique hand-collected data sets, one for our investor universe (FactSet LionShares Global Ownership), one for corporate governance (RiskMetrics Corporate Governance Quotient) and one for organisational improvements (SDC Platinum). Further, we deploy standard financial databases to source dividend payout and control variables. RESULTS Investors with high portfolio concentration and long investment horizon are consistently associated with corporate governance and organisational improvements but not with increases in dividend payout. Specifically, concentrated long-term investors relate to improvements in overall governance and board arrangements as well as corporate diversification reductions. Equally importantly, we find that investors with very high portfolio concentration and very long investment horizon exhibit no association with the same improvements, and propose a private benefit explanation. Our findings contribute to the present-day perception of who activist investors are and how they improve the companies they invest in. In contrast with current research on activism, we show that no externally labelled investor group captures the investors that are actively improving governance or organisation in their target companies. Further, we provide support for the perception that investor activism relies primarily on individual investors with the right characteristics rather than the firms’ overall ownership structures. en
dc.format.extent 173
dc.format.mimetype application/pdf en
dc.language.iso en en
dc.title Who are the activists? Investor characteristics and corporate improvements en
dc.type G2 Pro gradu, diplomityö fi
dc.contributor.school Kauppakorkeakoulu fi
dc.contributor.school School of Economics en
dc.contributor.department Department of Accounting and Finance en
dc.contributor.department Laskentatoimen ja rahoituksen laitos fi
dc.subject.keyword investor activism
dc.subject.keyword agency costs
dc.subject.keyword incentives to monitor
dc.subject.keyword corporate improvements
dc.identifier.urn URN:NBN:fi:aalto-201111181434
dc.type.dcmitype text en
dc.programme.major Finance en
dc.programme.major Rahoitus fi
dc.type.ontasot Master's thesis en
dc.type.ontasot Pro gradu tutkielma fi
dc.subject.helecon rahoitus
dc.subject.helecon financing
dc.subject.helecon agentit
dc.subject.helecon agents
dc.subject.helecon sijoitukset
dc.subject.helecon investments
dc.subject.helecon corporate governance
dc.subject.helecon corporate governance
dc.subject.helecon kehitys
dc.subject.helecon development
dc.ethesisid 12390
dc.date.dateaccepted 2010-09-08
dc.location P1 I

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