Active block investors and corporate governance around the world

Abstract

In this paper, we examine a sample of 3119 minority block acquisitions around the world. One in seven firms are targeted by active investors who either have their own representatives on the board or in the extreme case, replace existing CEOs. We find that active investors are more prevalent in countries with good investor protection. Further, firms targeted by active investors experience significantly higher announcement returns and a significantly higher increase in profitability, sales, and investment expenditures subsequent to the block acquisition, especially in countries with good investor protection.