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Does Coordinated Institutional Activism Work? An Analysis of the Activities of the Council of Institutional Investors

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The Council of Institutional Investors is a group of public and private pension funds which collectively own over $800 billion in financial assets within the United States. The Council has provided a forum for these funds to coordinate and communicate with each other on a variety of matters including activism programs aimed at facilitating solution of problems in underperforming portfolio firms. The Council has issued a focus list of poorly performing firms for each of the last five years to its members who have the discretion to pursue activism programs. These lists have included well-publicized underperformers such as IBM, Kodak and Sears along with a variety of less known cases. This study documents the performance of 96 firms which appeared on the Councils focus lists in 1991, 1992 and 1993 relative to several control groups. Firms on Council focus lists experience poor share price performance in the year before before being included on a focus list. In the year after being listed, these firms experienced an average share price increase of 11.6% above the S&P 500. Given that the mean equity market value of Council listed firms was $3.42 billion we estimate a total abnormal dollar gain of these firms of $39.7 billion. This increase is broadly consistent with the view that coordinated institutional activism creates shareholder wealth.

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  • Tim C. Opler & Jonathan Sokobin, "undated". "Does Coordinated Institutional Activism Work? An Analysis of the Activities of the Council of Institutional Investors," Research in Financial Economics 9505, Ohio State University.
    • Handle: RePEc:wop:ohsrfe:9505
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    File URL: http://www.cob.ohio-state.edu/~fin/journal/dice/papers/1995/95-5.pdf
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    1. Siala Bouaziz Souha & Jarboui Anis & David McMillan, 2016. "Corporate governance and firm characteristics as explanatory factors of shareholder activism: Validation through the French context," Cogent Economics & Finance, Taylor & Francis Journals, vol. 4(1), pages 1150407-115, December.
    2. Peng, Fei & Kang, Lili & Jiang, Jun, 2011. "Selection and institutional shareholder activism in Chinese acquisitions," MPRA Paper 38701, University Library of Munich, Germany.
    3. Kim, Woochan & Kim, Woojin & Kwon, Kap-Sok, 2009. "Value of outside blockholder activism: Evidence from the switchers," Journal of Corporate Finance, Elsevier, vol. 15(4), pages 505-522, September.
    4. Artiga González, Tanja & Calluzzo, Paul, 2020. "A new breed of activism," Finance Research Letters, Elsevier, vol. 37(C).
    5. Lars Nordén & Therese Strand, 2011. "Shareholder activism among portfolio managers: rational decisions or 15 minutes of fame?," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 15(3), pages 375-391, August.
    6. Crutchley, Claire E. & Hudson, Carl D. & Jensen, Marlin R. H., 1998. "Shareholder Wealth Effects of CalPERS' Activism," Financial Services Review, Elsevier, vol. 7(1), pages 1-10.
    7. Simon Rafaqat & Sana Rafaqat & Sahil Rafaqat & Saoul Rafaqat & Dawood Rafaqat, 2023. "Shareholder Activism and Firm Performance: A Review," Journal of Economics and Behavioral Studies, AMH International, vol. 14(4), pages 31-41.
    8. Sudi Sudarsanam & Tim Broadhurst, 2012. "Corporate governance convergence in Germany through shareholder activism: Impact of the Deutsche Boerse bid for London Stock Exchange," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 16(2), pages 235-268, May.
    9. Stuart L. Gillan & Laura T. Starks, 2002. "Institutional Investors, Corporate Ownership, and Corporate Governance: Global Perspectives," WIDER Working Paper Series DP2002-09, World Institute for Development Economic Research (UNU-WIDER).
    10. Gillan, Stuart L. & Starks, Laura T., 2000. "Corporate governance proposals and shareholder activism: the role of institutional investors," Journal of Financial Economics, Elsevier, vol. 57(2), pages 275-305, August.
    11. Stuart L. Gillan & Laura T. Starks, 2007. "The Evolution of Shareholder Activism in the United States," Journal of Applied Corporate Finance, Morgan Stanley, vol. 19(1), pages 55-73, January.
    12. Sadorsky, Perry, 2014. "Modeling volatility and conditional correlations between socially responsible investments, gold and oil," Economic Modelling, Elsevier, vol. 38(C), pages 609-618.
    13. Woidtke, Tracie, 2002. "Agents watching agents?: evidence from pension fund ownership and firm value," Journal of Financial Economics, Elsevier, vol. 63(1), pages 99-131, January.
    14. Clifford, Christopher P., 2008. "Value creation or destruction? Hedge funds as shareholder activists," Journal of Corporate Finance, Elsevier, vol. 14(4), pages 323-336, September.

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