The PSI Model for Predicting Activist Engagements: Toward a Theory of Shareholder Activism

This paper introduces a multidimensional theoretical perspective for predicting shareholder activism. First, I outline a generalized process of activist targeting, divided into two stages: target identification and target engagement. Second, I argue that activist shareholders target firms based on three elements: problem, solution, and intervention. Synthesizing several strands of literature and insights from the target identification stage of the activist targeting process, I develop the baseline proposition that activists do not merely target firms with clear problems, but account for the availability of viable solutions and the opportunity to intervene in their targeting calculus. Third, I extend this problem × solution × intervention (PSI) model to develop propositions about variation in the types and outcomes of activism campaigns that manifest in different contexts. Drawing on insights from the target engagement stage of the activist targeting process, I argue that activism campaigns vary in terms of both tactics and outcomes based on the configuration of the three elements of the PSI model.