Essays on shareholder activism

Abstract

My dissertation aims to understand the role of shareholder activists in influencing managerial decisions and the effect of this influence on shareholder wealth. With this objective in mind, I explore the role of shareholder activists in terms of: (i) corporate leasing; (ii) corporate spinoffs; and (iii) corporate carbon emissions. In the first essay, co-authored with Gaizka Ormazabal and Carles Vergara-Alert, we study the effect of shareholder activism in the context of corporate leases. We find that the presence of shareholder activists is associated with large increases in leasing. This association is stronger in periods of high real estate prices and for firms with larger amounts of real estate assets. We also study the economic consequences of leasing in the presence of activism. We find that these firms experience lower stock and bond performance, dividend increases, and decline in investments. Furthermore, we find that leasing activity is negatively correlated with acquisitions and proxy fights. We corroborate our inferences using a hand-collected sample of sale-leasebacks, which are common among firms that own large real estate assets. Overall, our findings highlight the critical role that shareholder activism plays in corporate leasing activity, but the results also hint at a trade-off between short-term payouts and long-term firm profitability. In the second essay, I study the effect of shareholder activism in the context of corporate spinoffs. I find that it plays a significant role in firms’ decisions to spin off corporate units. However, my evidence does not support the view that shareholder activism generates value by disciplining managerial behavior; I observe little effect of activist-induced spinoffs on subsequent firm performance and no association between such transactions and firms’ governance characteristics. In the third essay, I investigate the effect of shareholder activism on corporate carbon emissions. My findings are consistent with the notion that it plays an important role in the reduction of corporate carbon emissions. The evidence also suggests that the reduction of carbon emissions induced by shareholder activism can be done in a relatively economical way, namely without major negative consequences on firm outcomes. Overall, my results shed light on the current increase in shareholder activism related to corporate environmental, social, and governance (ESG) practices. This essay supports the view that institutional investors can be catalysts in driving firms to reduce their carbon emissions and to prepare for a low-carbon economy. Taken together, the three chapters of this dissertation contribute to our understanding of the role of activist investors on specific corporate decisions. Currently, there is a debate on the role of activist investors in the economy. In particular, recent research has examined the question of whether shareholder activism increases firm value. This literature focuses on stock returns around activism announcements, but relatively less is known about what the sources of these returns are. Therefore, we need more research uncovering what kind of corporate actions activists are pushing for and the consequences of these actions for shareholder value. My dissertation contributes to filling this gap.