Working Paper
Reputation and Investor Activism
Swem, Nathan; Johnson, Travis L. (2017-02)
We show that an activist's reputation is a critical determinant of the success of their campaigns. We model reputation as target managers' belief about the activist's willingness to initiate a proxy fight. Our model indicates reputation, rather than stake size, induces managers to settle without a proxy fight. We present empirical evidence supporting our model's predictions: target companies more-frequently increase payouts, change management or board composition, engage in a merger or acquisition, or otherwise reorganize in response to high reputation activist campaigns, while target actions ...
Finance and Economics Discussion Series , Paper 2017-036

Working Paper
Reputation and Investor Activism: A Structural Approach
Swem, Nathan; Johnson, Travis L. (2020-10-15)
We measure the impact of reputation for proxy fighting on investor activism by estimating a dynamic model in which activists engage a sequence of target firms. Our estimation produces an evolving reputation measure for each activist and quantifies its impact on campaign frequency and outcomes. We find that high reputation activists initiate 3.5 times as many campaigns and extract 85% more settlements from targets, and that reputation-building incentives explain 20% of campaign initiations and 19% of proxy fights. Our estimates indicate these reputation effects combine to nearly double the ...
Finance and Economics Discussion Series , Paper 2017-036r1