NO EXIT!: THE LOGIC OF DEFENSIVE SHAREHOLDER ACTIVISM

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Abstract

This paper examines the issue of what motivates shareholder activism. The standard explanation portrays shareholder activism as a response to poor corporate performance, but the empirical literature provides inconclusive support, indicating the need for alternative or complementary explanations. This paper contributes to the literature by showing, with the help of a case study, that shareholder activism can also be a response to increasing costs for exiting the investment, making outside shareholders increasingly exposed to expropriation risks. Significant expropriation risk can antecede a defensive type of shareholder activism characterized by intensified monitoring and reactive intervention to fend off expropriation attempts, which differs from the standard explanation in both motivation and outcome.

Keywords: Corporate Governance; Shareholder activism; Transaction Costs; Case Study

How to cite this paper: Jansson, A. (2014). No exit!: The logic of defensive shareholder activism. Corporate Board: role, duties and composition, 10(2), 16-31. https://doi.org/10.22495/cbv10i2art2