Shareholder Activism and Implications for Corporate Governance

Abstract

Shareholder activists have used multiple approaches to pressure corporate boards and managers to enhance firm value. Historically, traditional activists have included individuals, mutual funds, and pension funds, but in recent years hedge funds have come to play an ever increasing role. This paper will review recent academic literature on the topic of shareholder activism and address the different opportunities or constraints associated with each activist group. Additionally, the tactics employed by activist hedge funds and their effectiveness in pursuing value creation strategies and changes in board governance will be reviewed. Looking forward, the paper considers the implications associated with the enormous growth of hedge funds, particularly in light of current market conditions.