Is (Institutional) Shareholder Activism New? Evidence from UK Shareholder Coalitions in the Pre-Cadbury Era


Tilburg University, PO Box 90153, 5000 LE Tilburg, Netherlands. E-mail:


Manuscript Type: Empirical

Research Question/Issue: Does recent institutional shareholder activism have a precedent in the form of (ad hoc) shareholder coalitions that force the manager to leave poorly performing companies?

Research Findings/Insights: To address the above question, we investigate whether or not shareholder voting coalitions disciplined managers in the pre-Cadbury era. We find that the voting power held (Shapley values) by financial institutions (mainly, the insurance companies) are positively related to executive director turnover. Coalitions of industrial and commercial companies with strong relative voting power penalize poorly performing managers. In contrast, coalitions of executive directors are able to resist board restructuring. Finally, we a strong relation between top management substitution and high debt levels, especially in companies in need of refinancing.

Theoretical/Academic Implications: We use Shapley values which are power indices developed in the field of (oceanic) game theory in order to capture the relative voting power of a shareholder in all possible shareholder coalitions. A shareholder who is pivotal in many potential coalitions is hence powerful and received a high Shapley value. The use of such power indices yield much stronger results in our models that any of the other measures traditionally used in corporate governance research to measure voting power/ownership concentration. This methodology enables us to draw clear conclusions on the existence of voting coalitions.

Practitioner/Policy Implications: This paper shows that voting coalition of shareholders can be instrumental in bringing about change in poorly performing companies.