Korea Economic Cooperation "Corporate Value Drops Further Due to Activist Fund Intervention"

It has been analyzed that the intervention of "activist funds" that demand dividends and governance improvements by buying shares of certain companies could reduce corporate value in the long run.

The Korea Business Association said in a report today (21st) that out of 970 U.S. listed companies that have campaigned for activist funds since 2000, 549 were successful.

In particular, companies whose activist fund campaigns have been successful have seen their corporate value rise by 1.4 percentage points within three years, but since four years, their corporate value has fallen by 2.4 percentage points, making them undervalued by 1 percentage point more than before the activist fund intervention.

It also said employment and investment had fallen significantly by more than 5% in the long run, and dividends had also returned to their original levels after a short-term surge.

The Korea Economic Association pointed out that if the activist campaign is successful, it will reduce employment and investment in the short term and increase dividends, but in the long run, the corporate base could deteriorate, including reduced investment.