The effectiveness of institutional activism

• Main Authors: CATON, Gary L., GOH, Jeremy, DONALDSON, Jeffrey
• Format: text
• Language: English
• Published: Institutional Knowledge at Singapore Management University 2001
• Subjects: Finance and Financial Management; Portfolio and Security Analysis
• Online Access: https://ink.library.smu.edu.sg/lkcsb_research/2204; https://ink.library.smu.edu.sg/context/lkcsb_research/article/3203/viewcontent/Effectiveness_of_institutional_activism.pdf
• Institution: Singapore Management University

Researchers examined earnings-forecast revisions and stock returns after release of the Focus List of poorly performing companies by the Council of Institutional Investors. Using Tobin's q as a measure of a company's ability to improve performance, researchers found significant and positive abnormal forecast revisions and post-release stock returns for companies with q greater than one. Findings support the proposition that institutional activism is effective for underperforming companies - but only those companies with the ability to respond to the challenge to improve performance.