Corporate boards often react defensively when activist investors start making demands. In many cases, however, companies could benefit by listening to what the outsiders have to say and using the opportunity for a clear-eyed view of their organization. Partner Joe Cyriac and colleagues find that activist campaigns tend to stop a long downward trajectory in company performance and correspond with excess shareholder returns that persist for at least 36 months.
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A line graph demonstrates the effects of activist campaigns on excess TSR. The start of the activist campaign, indicated by the reference point at 100, charts data at yearly intervals spanning 3 years both before and after the campaign. The graph portrays a consistent decline in returns in the 3 years before the campaign, followed by a steady rise over the next 3 years.
Footnote: The data include 146 US companies, each with more than $1 billion in market cap and revenues, that launched successful activist campaigns from 2010–20. Excess TSR is based on the S&P 500.
Source: Investor Activism Data, S&P Capital IQ.
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To read the article, see “Barbarians at the gate?,” June 5, 2023.