Home

Investor Activism in Japan: The First 10 Years

Yasushi Hamao; Kenji Kutsuna; Pedro Matos

Title:
Investor Activism in Japan: The First 10 Years
Author(s):
Hamao, Yasushi
Kutsuna, Kenji
Matos, Pedro
Date:
Type:
Working papers
Department:
Center on Japanese Economy and Business
Permanent URL:
Series:
Center on Japanese Economy and Business Working Papers
Part Number:
289
Publisher:
Center on Japanese Economy and Business, Columbia University
Publisher Location:
New York
Abstract:
This paper provides a comprehensive examination of the first decade of investor activism in Japan. In the context of a remarkable transformation of the Japanese capital market, we document the rise of hedge fund and other investors with a total of 916 filings of block acquisitions by activists in the period from 1998 to 2009. We show that there is, on average, a (modest) positive stock price reaction to the announcement of an activist investment. These effects, however, are concentrated in events involving hostile funds. When we examine returns to activism in the long run we find that gains are not significant overall, except on positions in large target firms. We find that target firms tend to increase their payouts relative to peer firms in response to activist campaigns but we fail to find evidence that activists force target firm managers to institute major operational improvements. Finally we document the explosion in the adoption of "poison pills" by Japanese firms. We find that firms targeted by activists were more likely to adopt defense mechanisms. Since 2007 there has been a substantial reduction in activity by activist funds. Our paper contributes to the literature on investor activism by illustrating the limits to the success of activist funds in a market setting where the takeover market is thin and cannot be used by the activist investor as an "exit" strategy.
Subject(s):
Economics
Item views:
255
Metadata:
View

In Partnership with the Center for Digital Research and Scholarship at Columbia University Libraries/Information Services.