Smythe, McNeil & English: When does CalPERS’ activism add value?


The California Public Employees’ Retirement System (CalPERS) is a pioneer of shareholder activism and a leading proponent of governance reform among public pension funds. We examine factors (such as board structure, ownership structure, past performance, and size of target firms, as well as proposed governance reform) that may be associated with the value of CalPERS’ activism. The results can be useful in guiding institutional governance efforts in the future. The results show that poor prior performance, smaller firm size, and a larger board are associated with greater announcement period returns. In addition, there is weak evidence of greater announcement returns when the board includes a greater number of insiders, CEO ownership is high, and director and officer (excluding CEO) ownership is low.


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