Activists at the Gate: A Study of the Destabilization Effects of Shareholder Activism

Abstract

We analyze shareholder activist engagements and their impact on returns volatility of target company equity securities. As a rising force in corporate governance, share- holder activists are controversial yet powerful. Literature that studies shareholder activism is relatively limited given the recency of shareholder activism's prominence and focuses extensively on returns and rm characteristics. To extend the work done on this subject, we examine the impact of activist engagements on returns volatility, as well as returns skewness and kurtosis, which are often secondary but nonetheless important considerations for investors and the market. It is reasonable to expect shareholder activism to act as a destabilizing force in the market. We nd, how- ever, that shareholder activism does not increase volatility, excepting a spike during the near-term surrounding an SEC Schedule 13D ling to disclose activist intentions. Additionally, shareholder activism does not increase skewness or kurtosis beyond a short-term time period several months after the beginning of an engagement.