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Financial Markets and Portfolio Management

, Volume 32, Issue 4, pp 367–398 | Cite as

Are financial constraints of corporate activist investors perceived negatively?

  • Leopold Ingenohl
  • Nicolas Kube
Article
  • 54 Downloads

Abstract

This paper shows that financial constraints of corporate activist investors are negatively perceived by the market. By conducting an event study on a sample of 561 Schedule 13(D) filings disclosed by US corporations in the years 1996–2016, abnormal share price reactions in the [−10, \(+\)3] event window are about 10.8% lower for targets of financially constrained corporate investors. The average abnormal return for all targets is equal to 13.4%. This positive market response suggests that activism results in actual value improvement for the target. Yet, our analyses show that value improvements crucially depend on the investor’s access to external financing.

Keywords

Event study Activist investors Financial constraints 

JEL Classification

G14 G23 G32 

Notes

Acknowledgements

The authors thank the editor and the anonymous referee for their constructive comments and guidance.

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Copyright information

© Swiss Society for Financial Market Research 2018

Authors and Affiliations

  1. 1.University of St. GallenSt. GallenSwitzerland

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