Sunday, Jan. 7, 2018 10:15 AM - 12:15 PM
- Chair: Doron Levit, University of Pennsylvania
How are Shareholder Votes and Trades Related?
AbstractWe study the relation between shareholder votes and trading. We demonstrate that around the shareholder meeting date, the abnormal daily volume is substantially larger compared to the pre-voting period. This increase exists even for routine votes, and it is particularly large for important votes and when shareholders are unsupportive of management. We next analyze the vote-trade relationship at the investor level, using data on daily trades and the corresponding votes of the same funds. We find that before the meetings, funds’ trades and votes are positively correlated. However, funds update their trading patterns when a vote outcome contradicts the vote they cast. We also show that votes catalyze trading particularly when the price reaction is large, higher degrees of information asymmetries exist, and investors are not distracted.
Quasi-Insider Shareholder Activism: Corporate Governance at the Periphery of Control
AbstractWe document the role of investors at the periphery of control within a firm – “quasi-insiders” - in shareholder activism. These agents, including founders and former executives, launch campaigns in smaller, worse-performing firms than traditional hedge fund activists, seek greater control, and employ more aggressive tactics. While they are less likely to achieve the stated objectives of their campaigns, these campaigns are associated with positive abnormal returns comparable to those in hedge fund campaigns and subsequent improvements in operating performance. Overall, our results suggest that quasi-insiders play an important and effective role as activists in firms that are less likely to be targeted by hedge funds.
Blockholders Diversity: Effect of Polyphony on the Power of Monitoring
AbstractAccording to my new and extensive data on all US public companies, the majority of them have
multiple blockholders (large shareholders). These blockholders could differ along several characteristics
even within one company. Diversity between blockholders within a firm could have a
positive and synergistic impact on its value. Alternatively, conflicting objectives and interests
may cause diversity to adversely impact company operations. To investigate the resulting impact
of blockholders diversity on company value, I construct diversity measures reflecting their
heterogeneity in identity, portfolio size and investment horizon. Using shocks from blockholder
acquisitions of financial firms and unexpected increases in payouts they receive from other positions
to identify the causality channel, I find that block diversity has a strong negative influence
on company value and operations. This result is robust to a variety of specifications and to exclusion
of different groups of blockholders. Additionally, simulated placebo tests reject alternative
explanations related to other observed and unobserved characteristics of block ownership.
London School of Economics
Southern Methodist University
London School of Economics
Alan D. Crane,
- G3 - Corporate Finance and Governance