Still, Jiang of Columbia found that activism may not make companies more vulnerable to financial distress. The rate of bankruptcies during the economic downturn of 2008 and 2009 wasn’t higher for targets of activism than other companies, her study showed.
“If you are a public corporation and you get approached by an activist, and your advisers are telling you to light the torches, grab the pitchforks and man the perimeter, it’s time to get new advisers,” said Chris Davis, who heads the activist investor practice group at law firm Kleinberg Kaplan Wolff & Cohen in New York.