Research on gender biases in shareholder activism earns professor Harvard Business Review publication

Shareholder activism, wherein large investors pressure a firm to change strategic direction or make certain decisions, is on the rise in American financial markets. When such activism occurs, the CEOs most often feel the push and pull. But new research by a team of researchers, including Daniel B. Turban of the Trulaske College of Business, found that female CEOs are targeted by these so-called activist investors more than their male peers.

The research, published in Harvard Business Review, showed that activist investors aren’t immune to acting on gender stereotypes: female CEOs were 50 percent more likely to be targeted by activists and about 60 percent more likely to bear the brunt of multiple activist attacks. More activist threats means female CEOs may take bigger hits to their careers.

Aggressive shareholder activism requires the CEO to expend a considerable amount of their time and energy proving to investors that the firm’s leadership is steering it in the right direction, which gives the CEO less time to actually manage the firm and undermines their effectiveness. Activism, though it is rare overall, usually garners significant media attention and if female CEOs are more frequently the ones fending off attacks, it may perpetuate the biased notion that women don’t manage firms as well as men. Consequently, the team recommends activist investors and boards educate themselves about the gender biases they may be acting on and take steps to counteract them.

Daniel, an MU professor of management and the Emma S. Hibbs Gunnison Brown Chair of Business and Economics, was part of a research team that included HBR co-authors Vishal K. Gupta, a doctoral alumnus of Trulaske, and Sandra Mortal of the University of Alabama, Seonghee Han, of Pennsylvania State University, and Sabatino Silveri, of the University of Memphis Fogelman College of Business and Economics. They analyzed data from 3,026 large U.S. firms between 1996 and 2013, and identified investor activity by looking at Security and Exchange Commission (SEC) records. These records indicated when shareholders acquired more than five percent of a public company’s stock with the intention of influencing management. From this analysis, they found more than 1,500 cases of shareholder activism for 1,090 firms in their sample. The team has written a paper that has been accepted for publication by the Journal of Applied Psychology.