Revsine Professorship recipients focus on shareholder activism 

The 2009-2010 Lawrence Revsine Research Professorship has been awarded to a Kellogg professor and a doctoral student studying the phenomenon of shareholder activism.

	Wan Wongsunwai
	Photo © Evanston Photographic Studios

Wan Wongsunwai, assistant professor of accounting information and management, says he and Liang Tan will focus on the types of corporate governance reforms sought by the activists. The team will examine the role played by the financial reports firms use to communicate corporate performance to their shareholders, and the mechanisms used by activist shareholders in their attempts to change the status quo.

"It's great to have the opportunity to do this type of research in this area particularly, because the data has to be laboriously collected, which is expensive," Wongsunwai said. "This award helps enormously because it allows us to recruit manpower to help us gather the data and purchase software to run specialized tests."

The Revsine Research Professorship was a gift from alumnus Michael Shannon '83 and his family to honor the late Lawrence Revsine, the John and Norma Darling Distinguished Professor of Financial Accounting. Now in its third year, the professorship supports junior Kellogg faculty pursuing financial reporting research.

It is the second year in a row that Wongsunwai has received the award. Last year, he and assistant accounting professors Jayanthi Sunder and Shyam V. Sunder used the professorship to examine hedge fund investors and their economic effects on debt providers to the target firms.

One of the team's objectives was to reconcile mixed evidence on whether creditors in target firms are adversely affected when hedge funds intervene. The professors' preliminary evidence indicates that bank-loan spreads increase significantly subsequent to hedge fund intervention, but only in target firms that end up being acquired.

When the hedge fund intervention improves the alignment between the target firms' managers and investors — for instance, when perquisite consumption by managers is reduced — debt providers are no worse off than they were in the pre-intervention period. Wongsunwai's team is conducting additional analysis to extend these findings to better understand the effects of shareholder governance mechanisms on creditors.