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Pension Fund Activism and Firm Performance

Sunil Wahal
The Journal of Financial and Quantitative Analysis
Vol. 31, No. 1 (Mar., 1996), pp. 1-23
DOI: 10.2307/2331384
Stable URL: http://www.jstor.org/stable/2331384
Page Count: 23
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Since scans are not currently available to screen readers, please contact JSTOR User Support for access. We'll provide a PDF copy for your screen reader.
Pension Fund Activism and Firm Performance
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Abstract

This paper studies the efficacy of pension fund activism by examining all firms targeted by nine major funds from 1987 to 1993. I document a movement away from takeover-related proxy proposal targetings in the late 1980s to governance-related proxy proposal and nonproxy proposal targetings in the 1990s. For the vast majority of firms, there are no significant abnormal returns at the time of targeting. The subset of firms subject to nonproxy proposal targeting, however, experiences a significant positive wealth effect. There is no evidence of significant long-term improvement in either stock price or accounting measures of performance in the post-targeting period. Collectively, these results cast doubt on the effectiveness of pension fund activism as a substitute for an active market for corporate control.

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