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Why Do Institutional Investors Oppose Shareholder Activism? Evidence from Voting in Proxy Contests

Liu, Yanran (2019) Why Do Institutional Investors Oppose Shareholder Activism? Evidence from Voting in Proxy Contests. Doctoral Dissertation, University of Pittsburgh. (Unpublished)

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Abstract

This paper documents significant heterogeneity in institutional investors' support for shareholder activism in proxy contests and examines the following question: why do institutional shareholders frequently vote against activists when the activists’ actions increase the value of target firms? I propose that the voting decisions of institutional investors depend on the effect of shareholder activism on the return of the institutions’ combined shareholdings in both targets and their rival firms. Because institutions underweight target firms and activism could adversely affect the values of rival firms, institutional investors often lack incentives to support activists when gains on targets are diluted or offset by losses on rival firms. Using hand-collected data of mutual and pension fund voting in proxy contests, I find evidence that institutions that benefit less from activism events are less likely to support the activists, even when the activist’s effect on the target firm’s stock price is positive. Furthermore, when target firms do not have publicly-traded competitors, institutional investors are more likely to support activists. The evidence is consistent with the hypothesis that institutional investors’ portfolio returns explain whether or not they support activists.


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Details

Item Type: University of Pittsburgh ETD
Status: Unpublished
Creators/Authors:
CreatorsEmailPitt UsernameORCID
Liu, Yanranyanran.liu@pitt.eduyal77
ETD Committee:
TitleMemberEmail AddressPitt UsernameORCID
Committee ChairLehn, KennethLEHN@katz.pitt.edu
Committee MemberDenis, DavidDJDENIS@pitt.edu
Committee MemberSchlingemann, Frederikschlinge@katz.pitt.edu
Committee MemberSpatt, Chestercspatt@andrew.cmu.edu
Date: 27 September 2019
Date Type: Publication
Defense Date: 11 July 2019
Approval Date: 27 September 2019
Submission Date: 25 July 2019
Access Restriction: 2 year -- Restrict access to University of Pittsburgh for a period of 2 years.
Number of Pages: 96
Institution: University of Pittsburgh
Schools and Programs: Joseph M. Katz Graduate School of Business > Business Administration
Degree: PhD - Doctor of Philosophy
Thesis Type: Doctoral Dissertation
Refereed: Yes
Uncontrolled Keywords: activism, institutional investors, corporate control, proxy fights
Date Deposited: 27 Sep 2019 17:15
Last Modified: 27 Sep 2019 17:15
URI: http://d-scholarship.pitt.edu/id/eprint/37158

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