Explaining Activism (1): Existence of a Problem

Abstract

The first approach explains the occurrence of shareholder activism in terms of the existence of an unsatisfactory situation before the activism. A large number of studies, and almost all in corporate finance, have taken this approach, which investigates whether relatively underperforming companies have been more likely to experience shareholder activism. Although it is not always expressed explicitly, the two major theoretical grounds of this approach are equity theory of human motivation and agency theory.