Soft Shareholder Activism

This paper studies the conditions under which voice and exit are e¤ective forms of shareholder activism. Di¤erent from the existing literature, voice is interpreted as a strategic transmission of information from an activist investor to an opportunistic man-ager. The analysis provides several results. First, voice and exit exhibit complementarity. Second, transparency reduces the credibility of voice and thereby harms shareholder value. Third, the value of the \u85rm can decrease with the quality of the activists private informa-tion and increase with the cost of obtaining this information. Forth, managerial myopia unambiguously bene\u85ts shareholders if and only if the activist can voice herself. Finally, voice can be e¤ective even when the activist is biased, and sometimes, even more e¤ective than when the activist is unbiased