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Soft Shareholder Activism

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  • Doron Levit

Abstract

This paper studies communications between investors and firms as a form of corporate governance. Activist investors cannot force their ideas on companies; they must persuade the board or other shareholders that implementing these ideas is beneficial to the firm. I show that the threat of voice (i.e., launching a public campaign) facilitates communication, whereas the option to exit facilitates communication if and only if the proposal is risky relative to the status quo or voice is ineffective as a governance mechanism. The analysis identifies factors that contribute to successful dialogues between investors and firms.ReceivedMay 31, 2017; editorial decision September 4, 2018 by Editor Francesca Cornelli.

Suggested Citation

  • Doron Levit, 2019. "Soft Shareholder Activism," The Review of Financial Studies, Society for Financial Studies, vol. 32(7), pages 2775-2808.
    • Handle: RePEc:oup:rfinst:v:32:y:2019:i:7:p:2775-2808.
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    File URL: http://hdl.handle.net/10.1093/rfs/hhy119
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