Latest Seminars

Dear CEO: Activist Investors' Tactical Use of Letters to Influence Campaign Success

Activist hedge funds have become a dominant force in the market for corporate control. Seeking to enhance shareholder value, these activist investors regularly launch campaigns to bring about changes in firms’ corporate strategy and governance. Yet, our scholarly understanding of the tactics deployed by activist investors to influence the companies they target is limited. Given the social context of an activist campaign, we propose that activists utilize impression management tactics (i.e., self-presentation) to influence and persuade the management and boards of target firms to accede to their demands. Specifically, we theorize that the confidence that activists convey in their letters to the target firm’s board and management creates an impression of competence which positively impacts their ability to get their demands met. Our text-analysis of the linguistic attributes of the letters sent by activists to US targeted firms from 2008 to 2016 finds that activist investors who express strong confidence in their letters have greater campaign success. We further postulate and find that the impact of expressed confidence on campaign success is contingent on activist investors’ prior campaign success and the target firm’s ownership structure (passive vs. active shareholders). Collectively, our findings contribute to corporate strategy research and impression management theory.

 

Speaker :
Prof. Matthias Brauer, University of Mannheim
Venue :
LSK Rm5047 (Lift 1-2)
Date :
04.04.2019
Time :
10:30am-12:00pm