Sunday, May 5, 2013
Pre-Disclosure Accumulations by Activist Investors: Evidence and Policy, by Lucian A. Bebchuk, Harvard Law School; National Bureau of Economic Research (NBER); European Corporate Governance Institute (ECGI); Alon P. Brav, Duke University - Fuqua School of Business; Robert J. Jackson Jr., Columbia Law School;and Wei Jiang, Columbia Business School - Finance and Economics, was recently posted on SSRN. Here is the abstract:
A rulemaking petition recently submitted to the Securities and Exchange Commission by the senior partners of a prominent law firm urges the SEC to accelerate the timing of the disclosure of accumulations of large blocks of stock in public companies. Relying upon a few recent anecdotes, the petition argues that existing rules have been rendered obsolete by changes in trading technology that enable activist investors to accumulate increasingly large blocks of stock before disclosing.
In this Article, we provide the first systematic evidence on all disclosures by activist investors and the first empirical analysis of this subject. We find that key factual premises underlying the petition, including the assumption that pre-disclosure accumulations have increased considerably over time, are not supported by the evidence. Moreover, we show that accelerating the timing of disclosure could have adverse effects on public-company investors and identify important but overlooked consequences of the considered reform of disclosure rules. Our analysis provides empirical evidence that should inform the SEC’s consideration of this issue — and a foundation on which subsequent empirical and policy analysis can build.