Glen Young

The allegation that activist investors demand changes that increase short-term stock prices at the expense of long-term shareholder value (“short-termism”) has led to extensive research on interventions by hedge funds. Few studies include other private (non-hedge fund) activists, even though we find they constitute almost half of interventions. Using a 20-year sample that includes over 2000 interventions by each type of activist, we find that short- and long-window abnormal returns are positive and economically significant around ownership announcements for each activist, and they do not reverse. Importantly, positive returns are observed for both sale and most other (non-sale) demands. Demands to sell all, or part, of the targeted firms earn especially sizable returns, and interestingly, sale demands are made more frequently by other private activists than by hedge funds. Despite the sizable returns, informed users do not regard the equity as overvalued. Analysts’ recommendations become more favorable—a reversal of the pre-announcement trend—and long-term, “dedicated” institutional investors increase their ownership. We also find post-intervention improvements in operating performance (ROA) and firm valuation (Tobin’s Q), further justifying the positive response by market participants. Our study provides new evidence that activism increases long-term shareholder value and opens an avenue for a line of research on other private activists.

ChatGPT, a language-learning model chatbot, has garnered considerable attention for its ability to respond to users’ questions. Using data from 14 countries and 186 institutions, we compare ChatGPT and student performance for 28,085 questions from accounting assessments and textbook test banks. As of January 2023, ChatGPT provides correct answers for 56.5 percent of questions and partially correct answers for an additional 9.4 percent of questions. When considering point values for questions, students significantly outperform ChatGPT with a 76.7 percent average on assessments compared to 47.5 percent for ChatGPT if no partial credit is awarded and 56.5 percent if partial credit is awarded. Still, ChatGPT performs better than the student average for 15.8 percent of assessments when we include partial credit. We provide evidence of how ChatGPT performs on different question types, accounting topics, class levels, open/closed assessments, and test bank questions. We also discuss implications for accounting education and research.

This study provides novel evidence on the strategic role of media coverage in influencing shareholder activism campaigns. Analyzing a comprehensive dataset of activist interventions from 2000-2014, we find activists strategically target firms with high levels of recent business press coverage, especially negative coverage. These findings support theoretical predictions that activists prefer transparent, poorly-performing firms. We also find a positive association between pre-intervention press coverage and the likelihood an activism campaign receives coverage. This “sticky” media coverage effect suggests activists target visible firms to increase campaign exposure. Finally, using propensity score matching and regression analysis, we show activist campaigns receiving press coverage have significantly higher announcement returns, underscoring a key benefit of media coverage for activists. Overall, our results highlight the important interplay between media coverage, shareholder activists, and capital markets. The findings should interest managers seeking to assess activism risk and activists aiming to maximize campaign impact.

Despite its introduction to the auditing profession more than fifty years ago, and its prevalence in academic literature, regression analysis has not been widely taught in auditing courses. With auditing firms now able to access a client’s entire general ledger, regression analysis has become a powerful analytical tool. We have found that incorporating an example of regression analysis when introducing data analytics and analytical procedures to students provides an opportunity to review statistical concepts and nonstatistical considerations. Student feedback indicates reviewing these concepts in a relevant audit application enhances their understanding of statistical analysis concepts, terminology, and application. Additionally, students develop an appreciation for regression analysis as a valuable analytical tool.