Activists on board: Shareholder activists and their influence on firm strategic change

The prevalence of shareholder activism has resulted in the placement of activist-appointed directors onto the boards of firms. Extant research on this phenomenon has taken a rational approach in examining how such directors bring about change but has not accounted for the behavioral implications associated with their placement on boards. Building on theory involving alignment and legitimacy at the team level, this paper adopts a behavioral approach in theorizing how the placement of activist shareholders themselves as directors onto the boards of firms brings about firm change. The study finds that such activists lead to less firm change. Further, it finds support for the effects of demographic similarity between such activists and incumbent directors in causing change.