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Activism and takeovers

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  • Burkart, Mike
  • Lee, Samuel

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

  • Burkart, Mike & Lee, Samuel, 2022. "Activism and takeovers," LSE Research Online Documents on Economics 111564, London School of Economics and Political Science, LSE Library.
    • Handle: RePEc:ehl:lserod:111564
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    File URL: http://eprints.lse.ac.uk/111564/
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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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    JEL classification:

    • R14 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Land Use Patterns
    • J01 - Labor and Demographic Economics - - General - - - Labor Economics: General
    • F3 - International Economics - - International Finance
    • G3 - Financial Economics - - Corporate Finance and Governance

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