“In these companies, executives behave in a way very consistent with significant consumption of private benefits of control,” said Vyacheslav Fos, a professor at the University of Illinois and co-author of the study. “Executives act as if their private benefit of shares is higher than the market price. They are trying to defend themselves. This is what our study shows.”
Managers and their legal champions often claim to oppose activist shareholders on grounds activists are out for short-term gain, while the managers support long-term value. There is a lot of evidence activist attacks change companies for the better, bringing measurable operational and financial benefits. The new research shows how high a price executives are willing to pay to retain their power to resist such changes, which unsurprisingly may involve a change in management.
Read more: The Wall Street Journal
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