Shareholder Activism in Europe: Replicating the Alpha of Activist Investors

Valdemar J. Halbye & Morten L. Jessen

Student thesis: Master thesis


Shareholder activism has become a strong and dynamic institutional force, which amplifies investor scrutiny by monitoring and challenging managers of even the largest corporations. The Unites States has long been the nexus of shareholder activism, but recently it has expanded geographically – with particularly Europe experiencing a surge in active ownership. The academic coverage of shareholder activism in Europe is however virtually non-existent, and this paper therefore provides one of the first theoretical and empirical studies of the field of European shareholder activism. This is done by providing a multidisciplinary review that first explores the heterogeneity of factors constituting shareholder activism such as activist investor types, target characteristics and campaign objectives. Hereafter follows an empirical examination, which aims to assess whether European activist campaigns lead to abnormal market returns. Furthermore, this paper is the first to describe and assess how an abnormal return can be replicated to the benefit of third-party investors. A sample size of 304 European campaigns, extracted from a global sample of 2.900 campaigns from the period 2000-2016, forms the basis of a multi-level event study. Consequently, this paper finds that European activist campaigns had an announcement effect of 1.7% in cumulative abnormal return on the first 5 trading days following campaign announcement. The long-term evidence is even more substantial; European campaigns created a holding period abnormal return of 10.2% in the 250 trading days succeeding announcement. On the basis of these findings, this paper designs and empirically tests a practical replication strategy, which allows other investors to free ride on the corporate influence exercised by shareholder activists. A back-test of this strategy over the period 2006-2016 results in a compound annual growth rate of 9.6% on the initial investment. Assessing this strategy with respect to both cost, risk and return renders it as an attractive investment compared to alternatives

EducationsMSc in Finance and Strategic Management, (Graduate Programme) Final Thesis
Publication date2016
Number of pages127