Corporate governance, strategy and performance : antecedents and consequences of activism by institutional investors /
The diffusion in ownership accompanying the increase in size of public corporations decreased the power of its owners and provided managers significant discretion over corporate policies. The ownership structure of U.S. corporations has, however, changed dramatically in the past few decades with a...
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| Format: | Thesis Book |
| Language: | English |
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[Place of publication not identified] :
[publisher not identified] ;
1996.
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| Online Access: | http://proxy.library.tamu.edu/login?url=http://proquest.umi.com/pqdweb?did=739325561&sid=1&Fmt=2&clientId=2945&RQT=309&VName=PQD |
| Summary: | The diffusion in ownership accompanying the increase in size of public corporations decreased the power of its owners and provided managers significant discretion over corporate policies. The ownership structure of U.S. corporations has, however, changed dramatically in the past few decades with a new class of owners - institutional investors -- substantially increasing their ownership stakes. Institutional investors arc leveraging the power gained from their ownership stake by adopting an activist stance (e.g., by making public announcements or by initiating shareholder proposals) towards firms that are unresponsive to shareholders. This dissertation examines the antecedents and consequences of institutional activism on firms' governance, strategy, and performance. It is argued that domination by managers weakens governance mechanisms, leading to the pursuit of inappropriate strategy, and results in poor performance. Activism by institutional investors is expected to be directed towards poorly managed firms as indicated by ineffective governance, inappropriate strategy, and poor performance. Activism is hypothesized to discipline firms as to align the governance, strategy, and performance of the firm more closely with shareholder preferences. Hypotheses were tested using a panel data set of the 81 largest U.S. industrial firms during the period 1986-1994. Results of the analysis show that low performance and takeover defenses predicted institutional activism. Following activism, the proportion of independent directors increased, likelihood of separation of joint CEO-chairperson title increased, takeover defenses decreased, likelihood of CEO turnover increased, and innovation increased. Overall, the results support the view that institutional investors target poorly managed firms and change their governance and strategy in line with shareholder preferences. Institutional investors appear to be active monitors. However, their ownership stake is not sufficient to provide power; instead institutional investors need to bolster the power gained from their ownership stake by engaging in activism to exercise influence over managers. |
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| Item Description: | Vita. "Major Subject: Management". |
| Physical Description: | vi, 112 leaves ; 28 cm. Issued also on microfiche from University Microfilms Inc. |
| Bibliography: | Includes bibliographical references: pages 98-111. |