Empirical analysis reveals reduced corporate misconduct frequency and severity following shareholder activism in U.S. firms, indicating the vital governance role of activist investors.
Using misconduct measures from Violation Tracker and shareholder activism events based on Schedule 13D filings, this study investigates the influence of shareholder activism on corporate misconduct in U.S. firms. We find that firms targeted by activists show lower frequencies and severities of misconduct. These effects remain consistent across multiple empirical approaches, including entropy balancing and two‐stage least squares (2SLS) instrumental variable analysis. Cross‐sectional analyses demonstrate that this effect is more pronounced in firms with CEO duality, internal control weaknesses and higher leverage. These results indicate the vital role of shareholder activism in curbing misconduct.
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Sun et al. (2026) studied this question.
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