The Devil is in the Details: Firm-Specific or Market Information in Shareholder Activism

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2020-08-16
Authors
Pei, Duo
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This study measures how shareholder activism may change market participants' processing and incorporation of different types of information. Specifically, I examine the earnings response coefficient (ERC), price delay, and probability of informed trading (PIN), which capture the usage of firm-specific public information, public market-wide information, and firm-specific private information, respectively. I find an increase in ERC, price delay, and PIN during shareholder activism. I also find an influx of attention-based trading in the 2 quarters immediately after 13D filing, which is subsequently replaced by information-based trading. The findings are consistent with a slower reflection of publicly available market-wide information and investors engaging in more firm-specific information processing. Investors appear to substitute more general information with focused information about activist targets in their trading decisions.
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Shareholder Activism, Price Response, Investor Attention, Firm-Specific Information, Private Information, Public Information
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