As part of the series of the „Finance Research Seminar“, VGSF welcomes Vyacheslav (Slava) Fos from Boston College Carroll School of Management to present his research paper.
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Paper
Learning, experience and activism skill
joint with Rui Albuquerque and Enrique Schroth
We document that 40% of first-time activists exit the industry and that the exit rate for activists declines with campaign experience. To rationalize these facts, we propose a dynamic model in which activists are uncertain about their skill and each campaign yields both expected returns and information about skill. The model generates new predictions regarding activism and experience: the probability of starting a campaign decreases with experience, and the activist’s probability of exiting the industry decreases with experience for high skill. We provide evidence for these and other predictions. The learning mechanism suggests that first-time activists cause a negative externality on target- firm shareholders: inexperienced activists may initiate low-return campaigns for their informational value.
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