THE IMPACT OF MINORITY SHAREHOLDER WATCHDOG GROUP ACTIVISM ON THE PERFORMANCE OF TARGETED FIRMS IN MALAYSIA

Rashid Ameer · Rashidah Abdul Rahman

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Corporate Finance and Governance Financial Markets and Investment Strategies Auditing, Earnings Management, Governance

Abstract

This paper investigates the impact of the Minority Shareholder Watchdog Group (MSWG) activism on the performance of targeted firms in Malaysia. We find that MSWGtargeted firms earn statistically significantly higher stock returns than non-targeted firms in the long run. The results of various hypothesis tests involving firm performance measures show that MSWG-targeted firms experience significant increase in earnings relative to non-targeted firms in the first and second years after MSWG involvement. Our results imply that although the MSWG's approach to activism might not be comparable to the initiatives of independent activists in developed financial markets, this type of activism does make a difference by providing minority shareholders and institutional investors with resourceful solutions to reduce information asymmetries that have significant economic consequences.

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References

1998Law and Finance 1986Agency Costs of Free Cash Flow, Corporate Finance, and Takeovers 2000Corporate governance proposals and shareholder activism: the role of institutional investors 1988Stock prices and top management changes 2002Cronyism and capital controls: evidence from Malaysia 2008Hedge Fund Activism, Corporate Governance, and Firm Performance 1996Shareholder Activism by Institutional Investors: Evidence from CalPERS 2007Why do countries matter so much for corporate governance?☆

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