Shareholder Activism by Institutional Investors: Evidence from CalPERS



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    • Economic Analysis Corporation, Los Angeles. This article is based on my dissertation at Arizona State University. I thank DeWitt Bowman (Chief Investments Officer), Kayla Gillan (Assistant General Counsel), Jose Arau (Director of Corporate Relations) and Hilda Applbaum (Director of Research) of CalPERS for providing valuable data and information. I also thank Hank Bessembinder, Jim Booth, Jay Coughenour, Dan Deli, Stu Gillan, Mike Joehnk, Herb Kaufman, Frank Kerins, Ken Lehn, Paul Seguin, Janet Smith, Susan Woodward, René Stulz, the editor, and two referees for helpful comments. I especially thank my dissertation chair, Rick Smith, for invaluable guidance and suggestions. Financial support was provided by the Arizona State Unversity Regents Dissertation Scholarship.


This study examines firm characteristics that lead to shareholder activism and analyzes the effects of activism on target firm governance structure, shareholder wealth, and operating performance for the 51 firms targeted by CalPERS over the 1987–93 period. Firm size and level of institutional holdings are found to be positively related to the probability of being targeted, and 72 percent of firms targeted after 1988 adopt proposed changes or make changes resulting in a settlement with CalPERS. Shareholder wealth increases for firms that adopt or settle and decreases for firms that resist. No statistically significant change in operating performance is found.