Activist Investor Interventions: A Path to Stock Performance Improvement
Recent research published in the Financial Analysts Journal suggests that activist investor interventions with small, newly public companies can have a positive impact on their stock performance. The study, titled “Shareholder Activism in Small-Cap Newly Public Firms,” by Emmanuel R. Pezier and Paolo F. Volpin, showcases how engagements with these companies led to 8% to 10% in cumulative abnormal returns. The key takeaway is that these returns were attributed to the activism itself, not stock picking.
In a conversation with Pezier, an associate scholar at Saïd Business School, University of Oxford, conducted for the CFA Institute Research and Policy Center, we delve deeper into the implications of this study and its significance in the world of finance.
CFA Institute Research and Policy Center: What makes this research unique?
Emmanuel R. Pezier: This study focuses on small-cap companies that have recently gone public, exploring whether activism strategies that work for large-cap firms are equally effective in smaller ones. Additionally, the research introduces previously private data, offering fresh insights into shareholder activism dynamics within these firms.
What inspired the study?
The aim was to understand if the success seen in shareholder activism within large corporations translates to small-cap IPOs. The findings confirm the effectiveness of such interventions in generating returns.
Key findings of the study:
The research highlights the substantial returns achievable through engagements with small newly public companies. It emphasizes the potential of activism in unlocking value within these firms.
Who should pay attention to the study’s findings?
Investors involved in small-cap IPOs would find this study particularly relevant. It sheds light on the opportunities and benefits of shareholder activism in enhancing investment outcomes.
Implications for the industry:
The research provides valuable insights for institutional investors navigating the challenges of engaging with small firms characterized by high insider ownership. It offers a blueprint for leveraging activism in driving positive outcomes.
Future research opportunities:
Further studies could explore activist engagements that capitalize on potential fault lines within company structures. These investigations could unveil strategies to maximize returns through targeted interventions.
For more insights, read the full research article here in the Financial Analysts Journal.
Don’t miss out on our latest updates! Subscribe to Enterprising Investor and the CFA Institute Research and Policy Center for more exclusive content.
Disclaimer: All opinions expressed in this post are personal and should not be construed as investment advice. The views presented do not necessarily align with those of CFA Institute or the author’s employer.
Image credit: ©Getty Images / Buena Vista Images
Professional Learning for CFA Institute Members
CFA Institute members can earn and report professional learning credits by engaging with content on Enterprising Investor. Keep track of your credits using the online PL tracker.