Activist investors are a plus for firms they target – not just for days but for years, new research finds
Are activist investors mainly out to make a fast buck or are they a long-term plus for the companies they target? A paper that can lay claim to being the largest and broadest investigation of this hotly debated issue finds the latter to be generally the case.
Presented this month at the annual meeting of the American Accounting Association in New York, the study by Edward Swanson and Glen Young of Texas A&M University, essayed the largest sample of activist events yet examined – some 5,000 initiatives over 21 years. They report that the interventions not only occasioned a short-term boost in stock price but, on average, superior stock performance and strengthened company fundamentals over the long term.
In all, the study embraces 4,870 activist campaigns involving 2,652 unique firms, with the researchers monitoring indicators from two years before interventions to two years after. Most of the sample came from activism-monitoring website SharkRepellent.net. Ironically, the activists turned out to be less like sharks than friendly dolphins.