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Shareholder Activism, Takeovers, and Managerial Discipline

Author

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  • Francesco Celentano

    (University of Lausanne - Faculty of Business and Economics (HEC Lausanne); Swiss Finance Institute)

  • Oliver Levine

    (University of Wisconsin - Madison - Department of Finance)

Abstract

We quantitatively assess the role of activism in the market for corporate control by developing and estimating a model featuring both activism and M&A. We find that activism complements M&A, reducing the agency frictions associated with takeovers. However, activism simultaneously crowds out some M&A activity by substituting for disciplinary takeovers. Both the threat of activism and actual activist intervention create shareholder value by improving CEO incentives, while the value from reduced takeover frictions is primarily captured by acquirers. We find that activists have an information advantage, which is critical to overcoming the free rider problem in activist intervention.

Suggested Citation

  • Francesco Celentano & Oliver Levine, 2025. "Shareholder Activism, Takeovers, and Managerial Discipline," Swiss Finance Institute Research Paper Series 25-81, Swiss Finance Institute.
    • Handle: RePEc:chf:rpseri:rp2581
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    Keywords

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    JEL classification:

    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G39 - Financial Economics - - Corporate Finance and Governance - - - Other
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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