Shareholder activism: Further evidence on the relationship between activists' demands and shareholder value creation

This research article analyses activist hedge fund campaigns and studies both shareholder value effects around the announcement of a campaign and the value creation over the entire campaign period. Further, we analyze observable returns by campaign objectives. We examine a sample of 197 international activism campaigns, initiated between 2014 and 2019. Significant Cumulative Average Abnormal Returns (CAARs) can be observed in both the short-term and the entire engagement period event windows. The results from activism differ by an activist investor's objectives and demands. CAARs related to elimination of a general undervaluation, a maximization of shareholder value, and an adjustment of a target firm's capital structure are the highest in our sample. We do not find empirical evidence that board representation or proxy fights increase the CAARs of activist investors' campaigns. Our study adds to the existing literature by analyzing abnormal returns not only around the announcement of the campaign but also over the entire campaign. We are of the opinion that relying exclusively on short-term returns poses significant limitations to inferences on shareholder value from activism and therefore applying a longer-term observation period is warranted.