Journal
REVIEW OF FINANCIAL STUDIES
Volume 32, Issue 7, Pages 2720-2774Publisher
OXFORD UNIV PRESS INC
DOI: 10.1093/rfs/hhy106
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- Rodney L. White Center for Financial Research
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We analyze whether the growing importance of passive investors has influenced the campaigns, tactics, and successes of activists. We find activists are more likely to seek board representation when a larger share of the target company's stock is held by passively managed mutual funds. Furthermore, higher passive ownership is associated with increased use of proxy fights, settlements, and a higher likelihood the activist achieves board representation or the sale of the targeted company. Our findings suggest that the recent growth of passive institutional investors mitigates free-rider problems and facilitates activists' ability to engage in costly, value-enhancing forms of monitoring.
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