Essays on Corporate Governance and Shareholder Activism

In these essays, I explore the relation between shareholder activism and corporate governance, mainly the board of directors and takeover defense measures. In the first essay, “Takeover defenses in the era of shareholder activism,” I examine whether or not takeover defense measures that were originally developed to protect the management have differential effects on the probability of shareholder activism. I also examine what are the types of demands activists make when there are defense measures in place and look at the outcomes following activist campaigns. I find that firms with a staggered board or dual-class shares are less likely to be targeted while firms with a poison pill in place are more likely to be targeted. Also, staggered board and poison pill are more likely to be removed following activism and target firms are more likely to be taken over following activism despite having defense measures in place. In the second essay, “Consequences to Directors of Shareholder Activism,” co-authored with Ian D. Gow and Suraj Srinivasan, we examine how shareholder activists can influence accountability of the board of directors. We find that the directors are more likely to leave the board in the two years following activist engagement and their turnover is more sensitive to their performance in the period leading up to shareholder activism. However, we do not find evidence of reputational consequences for the directors as we do not find changes in the number of other board seats. In the third essay, “Activist directors – determinants and consequences,” also co-authored with Ian D. Gow and Suraj Srinivasan, we examine whom the directors shareholder activists put in when they are granted a board seat or when they win proxy fights and whether having these board seats can help them achieve their goals more effectively. We identify 1,369 activist directors during the period of 2004–2015. Activists remain as shareholders longer when they have board seats and having activist directors is associated with significant strategic and operational actions by firms.