Adrian Aycan Corum

Adrian Aycan Corum

Contact Information

  • office Address:

    Steinberg-Dietrich Hall, 3620 Locust Walk, Philadelphia, PA 19104

Research Interests: Corporate Finance Theory, Corporate Governance, Shareholder Activism, Mergers and Acquisitions

Links: CV

Overview

My research interests primarily lie in corporate finance theory, and more specifically, in shareholder activism, mergers and acquisition, and corporate governance. My job market paper, “Activist Settlements”, is the first theoretical study of the settlements between activist investors and firms.

I will be available for interviews at the 2018 AEA/AFA/ASSA meetings in Philadelphia.

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Research

Activist Settlements (Job Market Paper)

Recently, activist investors have been reaching settlements with boards more often than they have been challenging boards in a proxy fight. In this paper, I provide a theoretical framework to study the economics of these settlements. The activist can demand that his proposal be implemented right away (“action settlement”) or demand a number of board seats (“board settlement”), which also gives the activist access to better information. I find that the incumbent’s rejection of board settlement reflects more of its private information than the rejection of action settlement does. Therefore, demanding board settlement increases the activist’s credibility to run a proxy fight upon rejection and leads to a higher likelihood of reaching a settlement in the first place. Moreover, obtaining fewer seats can increase the activist’s real control within the board. I draw several implications and empirical predictions of my model, e.g., related to shareholder value, costs of proxy fight, and activist expertise. Although the average shareholder value conditional on reaching a board settlement is always smaller (compared to action settlement), demanding board settlement can result in a higher ex-ante shareholder value. Furthermore, value-destroying proposals are not typically implemented following settlements, but rather after the activist wins a proxy fight.

 

Corporate Control Activism (with Doron Levit, Revise and Resubmit at Journal of Financial Economics)

We identify a commitment problem that prevents bidders from unseating resisting and entrenched incumbent directors of target companies through proxy fights. We discuss potential remedies and argue that activist investors are more resilient to this commitment problem and can mitigate the resulting inefficiencies by putting such companies into play. This result holds even if bidders and activists have similar expertise and can use similar techniques to challenge the incumbents, and it is consistent with the evidence that most proxy fights are launched by activists, not by bidders. Building on this insight, we study the implications of activist interventions on the M&A market.

 

Shareholder Activism: The Benefit of Suspicion (Work in progress)

Activist investors are often blamed for lobbying firms for changes that could benefit shareholders in the short run, but harm them in the long run. However, these endeavors can be successful only if the activist can convince the majority of other shareholders to support their campaign. In this paper I show that a conflict of interests between the activist and other shareholders of the firm (e.g., due to different investment horizons) can in fact increase the effectiveness of activist campaigns. Specifically, if the activist is likely to exit his investment before the long-term value of his proposal is realized, long-term shareholders will be more suspicious of his motives. To overcome this mistrust, the activist will have to produce and disclose more verifiable information that supports his proposal. Therefore, exit increases the incentives to produce and disclose information, thereby improving efficiency. In this respect, exist and voice are complements. With this insight, I study the welfare implications of exit, voice, and shareholder heterogeneity.

  • Adrian Corum (Working), Activist Settlements.

    Abstract: Recently, activist investors have been reaching settlements with boards more often than they have been challenging boards in a proxy fight. In this paper, I provide a theoretical framework to study the economics of these settlements. The activist can demand that his proposal be implemented right away ("action settlement") or demand a number of board seats ("board settlement"), which also gives the activist access to better information. I find that the incumbent's rejection of board settlement reflects more of its private information than the rejection of action settlement does. Therefore, demanding board settlement increases the activist's credibility to run a proxy fight upon rejection and leads to a higher likelihood of reaching a settlement in the first place. Moreover, obtaining fewer seats can increase the activist's real control within the board. I draw several implications and empirical predictions of my model, e.g., related to shareholder value, costs of proxy fight, and activist expertise. Although the average shareholder value conditional on reaching a board settlement is always smaller (compared to action settlement), demanding board settlement can result in a higher ex-ante shareholder value. Furthermore, value-destroying proposals are not typically implemented following settlements, but rather after the activist wins a proxy fight.

  • Doron Levit and Adrian Corum (2015), Corporate Control Activism, Journal of Financial Economics, Forthcoming.

    Abstract: We identify a commitment problem that prevents bidders from unseating resisting and entrenched incumbent directors of target companies through proxy fights. We discuss potential remedies and argue that activist investors are more resilient to this commitment problem and can mitigate the resulting inefficiencies by putting such companies into play. This result holds even if bidders and activists have similar expertise and can use similar techniques to challenge the incumbents, and it is consistent with the evidence that most proxy fights are launched by activists, not by bidders. Building on this insight, we study the implications of activist interventions on the M&A market.

Teaching

Teaching Assistant, The Wharton School, University of Pennsylvania

Shareholder Activism (FNCE 387/887, UG/MBA)

Hedge Funds (FNCE 386/886, UG/MBA)

Girls Who Invest (UG)

The Finance of Buyout and Acquisitions (FNCE 251/751, UG/MBA)

Accelerated Corporate Finance (FNCE 612, MBA)

Advanced Corporate Finance (FNCE 726, MBA)

Teaching Assistant, Sabanci University

Statistical Modeling (MATH 306, UG)

Introduction to Stochastic Calculus (MATH 410, UG)

Introduction to Probability (MATH 203, UG)

Introduction to Mathematical Analysis (MATH 301, UG/MA)

Introduction to Computing (CS 201, UG)

Awards and Honors

Research Fellowship, Wharton Alternative Investments Initiative, University of Pennsylvania

Wharton Finance Doctoral Fellowship, University of Pennsylvania

The Marshall Blume Prizes in Financial Research, 1st prize, for Corporate Control Activism, The Rodney L. White Center for Financial Research, Wharton

2010 – 2011 Academic Year Teaching Assistant Award, 1st place, Sabanci University

Scholarship for Master’s, The Scientific and Technological Council of Turkey

Full Scholarship for Master’s Program, Sabanci University

Highest Ranking Student in the Class of 2010 Award, Sabanci University

Certificate of High Honor, for achieving 4.00/4.00 GPA each semester, Sabanci University

Sakip Sabanci Outstanding Success (Full) Scholarship, Sabanci University

  • Univ. of Penn Dean’s Fellowship for Distinguished Merit, 2012-2016

Activity

Latest Research

Adrian Corum (Working), Activist Settlements.
All Research

Awards and Honors

Univ. of Penn Dean’s Fellowship for Distinguished Merit 2012
All Awards