April 2017 (Revised October 2020)

Reputation and Investor Activism: A Structural Approach

Travis L. Johnson and Nathan Swem


We measure the impact of reputation for proxy fighting on investor activism by estimating a dynamic model in which activists engage a sequence of target firms. Our estimation produces an evolving reputation measure for each activist and quantifies its impact on campaign frequency and outcomes. We find that high reputation activists initiate 3.5 times as many campaigns and extract 85% more settlements from targets, and that reputation-building incentives explain 20% of campaign initiations and 19% of proxy fights. Our estimates indicate these reputation effects combine to nearly double the value activism adds for target shareholders.

Acessible materials (.zip)

Original paper PDF | Accessible materials (.zip)

Keywords: investor activism, reputation, governance, hedge funds, structural estimation

DOI: https://doi.org/10.17016/FEDS.2017.036r1

PDF: Full Paper

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Last Update: December 22, 2020