Coordinated Shareholder Activism: A Potential Remedy for the Firm Free-Rider Problem

We study coordinated shareholder activism campaigns, i.e., multiple activists simultaneously targeting the same firm. Using a unique and comprehensive database of activism events we document that activists prefer to participate in coordinated campaigns and that these campaigns produce significantly higher returns than non-coordinated campaigns. Consistent with activists working together, we find that this phenomenon is more prevalent among geographically proximate activists where frictions to coordination are lower. We posit that coordinated campaigns are a mechanism through which activists can mitigate free-rider problems. Consistent with this hypothesis, we find that coordinated campaigns are more prevalent where the free-rider problems faced by activists are greater - at large firms and among small activists