Open AccessReputation and Investor Activism: A Structural Approach
Author(s) -
Travis L. Johnson,
Nathan Swem
Publication year - 2020
Publication title -
finance and economics discussion series
Language(s) - English
Resource type - Journals
eISSN - 2767-3898
pISSN - 1936-2854
DOI - 10.17016/feds.2017.036r1
Subject(s) - reputation , shareholder , incentive , proxy (statistics) , business , measure (data warehouse) , microeconomics , political science , economics , computer science , finance , corporate governance , law , database , machine learning
We measure the impact of reputation for proxy fighting on investor activism by estimating a dynamic model in which activists engage a sequence of target firms. Our estimation produces an evolving reputation measure for each activist and quantifies its impact on campaign frequency and outcomes. We find that high reputation activists initiate 3.5 times as many campaigns and extract 85% more settlements from targets, and that reputation-building incentives explain 20% of campaign initiations and 19% of proxy fights. Our estimates indicate these reputation effects combine to nearly double the value activism adds for target shareholders.