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Shining a Light in a Dark Corner: Does EDGAR Search Activity Reveal the Strategically Leaked Plans of Activist Investors?

Published online by Cambridge University Press:  11 October 2022

Ryan Flugum Open the ORCID record for Ryan Flugum [Opens in a new window] ,
Choonsik Lee Open the ORCID record for Choonsik Lee [Opens in a new window]  and
Matthew E. Souther Open the ORCID record for Matthew E. Souther [Opens in a new window]
Ryan Flugum
Affiliation:
University of Northern Iowa College of Business [email protected]
Choonsik Lee
Affiliation:
University of Rhode Island College of Business [email protected]
Matthew E. Souther*
Affiliation:
University of South Carolina Moore School of Business
*
[email protected] (corresponding author)
Rights & Permissions [Opens in a new window]

Abstract

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We provide evidence of a network of information flow between activists and other investors prior to 13D filings. We match EDGAR search activity to investor IP addresses, identifying specific investors who persistently download information on an individual activist’s campaign targets in the days prior to that activist’s 13D disclosures. This outside investor’s knowledge of pending activist campaign plans seems to benefit both parties: the informed investor, unnamed in the 13D, increases its holdings in the targeted stock prior to the price surge upon 13D disclosure, while the activist earns voting support that increases their likelihood of pursuing and winning a proxy fight.

Type
Research Article
Information
Journal of Financial and Quantitative Analysis , Volume 58 , Issue 7 , November 2023 , pp. 2820 - 2851
Copyright
© The Author(s), 2022. Published by Cambridge University Press on behalf of the Michael G. Foster School of Business, University of Washington

Footnotes

The authors thank an anonymous referee, Adam Aiken, Nicole Boyson, Douglas Cumming, Richard Evans, Nickolay Gantchev, Reza Houston, Hyeongjun Kim, Nhan Le, Andrea Paltrinieri, Xinyu Wang, Yaxuan Wen, Steven Zheng, and session participants at the University of Rhode Island, the University of South Carolina, Ball State University, the 2020 Boca Corporate Finance and Governance Conference, the 2020 Annual Conference on Asia-Pacific Financial Markets, the 2021 Financial Markets and Corporate Governance Conference, the 2021 Joint Conference with the Allied Korea Finance Associations, the 2021 Financial Intermediation Research Society (FIRS) Conference, the 2021 Financial Management Association (FMA) Annual Conference, and the 2021 Southern Finance Association (SFA) Annual Conference for their valuable comments and suggestions. The authors also appreciate the American Registry for Internet Numbers (ARIN) for providing the historical WhoIs data (WhoWas) for our research. This article represents the opinions of the authors and is the product of academic research. Any errors are the fault of the authors.

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