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Activism and Takeovers

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  • Mike Burkart
  • Samuel Lee

Abstract

We compare activism and takeovers from the perspective of a blockholder who can provide effort to improve firm value. We show that free-riding behavior by dispersed shareholders has the following implications: First, activism can be more profitable than a hostile takeover even if it is less efficient. Second, activism is most efficient when it brokers, rather than substitutes for, takeovers. Third, such takeover activism earns superior returns. More broadly, our theory implies that activists specialize in governance reforms with limited, temporary ownership being a strength rather than a shortcoming of activism.

Suggested Citation

  • Mike Burkart & Samuel Lee, 2022. "Activism and Takeovers," The Review of Financial Studies, Society for Financial Studies, vol. 35(4), pages 1868-1896.
    • Handle: RePEc:oup:rfinst:v:35:y:2022:i:4:p:1868-1896.
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    File URL: http://hdl.handle.net/10.1093/rfs/hhab039
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    References listed on IDEAS

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    Cited by:

    1. Hege, Ulrich & Zhang, Yifei, 2022. "Activism Waves and the Market for Corporate Assets," TSE Working Papers 22-1397, Toulouse School of Economics (TSE).

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    More about this item

    JEL classification:

    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors

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