A new academic study published in the Journal of Financial Economics has found that most activist investors achieve their goals through persistent, informal pressure rather than the high-profile proxy fights and public campaigns that dominate headlines. The research, which analyzed over 1,800 activist engagements at U.S. public companies between 2010 and 2022, challenges the conventional understanding of how shareholder activism works.
The ‘bullying’ effect
Researchers from Harvard Business School and the University of Chicago Booth School of Business classified activist tactics into two categories: formal campaigns, which include public letters, shareholder proposals, and proxy contests, and informal pressure, which they defined as repeated private communications, subtle threats of public escalation, and persistent follow-ups with management and board members.
Also read: Inside the Startup Battlefield Top 20: How founders get selected and what every participant gains
The study found that informal pressure was the primary driver of success in more than 60% of cases where activists achieved their stated objectives. Formal campaigns, by contrast, were most effective only when preceded by a sustained period of private engagement. The paper’s authors coined the term ‘persistent bullying’ to describe the pattern of low-visibility, high-frequency contact that often leads to concessions from corporate boards.
‘The data shows that the loudest activists are not necessarily the most effective,’ said Dr. Elena Vasquez, a co-author of the study, in a statement. ‘The ones who succeed are often the ones who simply refuse to stop calling, emailing, and requesting meetings. They wear down resistance through sheer persistence.’
Also read: China's Factory Activity Stalls as May PMI Holds at 50.0
Implications for corporate boards
The findings have practical implications for how companies manage shareholder relations. Boards that dismiss low-key activist approaches as insignificant may be underestimating the risk of eventual escalation. The study noted that companies which responded to initial informal pressure with meaningful engagement were significantly less likely to face a public campaign later.
According to the research, the median activist engagement lasted 14 months, but successful informal campaigns averaged 22 months of sustained contact before a board made a concession. The most common demands involved board seats, capital allocation changes, and operational restructuring.
Market reaction and precedent
The study arrives at a time when activist investing is under increased scrutiny from regulators and institutional investors. The Securities and Exchange Commission has proposed new rules requiring greater disclosure of activist positions, while major pension funds have begun questioning the long-term value creation of short-term activist campaigns.
The researchers found that companies targeted by persistent informal activists underperformed their peers by an average of 3.2% in the 12 months following the activist’s initial contact, suggesting that the pressure itself can create value disruption regardless of outcome. However, companies that ultimately acceded to activist demands saw their stock prices recover within six months.
The paper is available on the Social Science Research Network and is expected to be formally published in the Journal of Financial Economics later this year.
