Traveling Governance Effect of Shareholder Activism: Evidence from Clawback Provision Adoption

We find that firms held by an institutional activist blockholder (IAB) are more likely to adopt clawback provisions when more of other firms held by the same IAB have adopted. This effect is stronger when peers adopt a strong form of clawback and maintain longer peer relations, for firms with more peers, and for more liquid firms. Proxy voting and selling shares by IABs show negative consequences for non-adopting firms when more peers have adopted. Our results are consistent with a tournament effect among IAB peers. The effect is distinct from peer effects stemming from industry, location, or board interlock.