The Effect Of Carl Icahn On Company Valuation

Want to know the impact of Carl Icahn taking a position in your stock? A group of researchers that claim to know the answer have had the summary of their findings posted on the Harvard Law School Forum.

According to the post, if the veteran activist takes a position in your company, you can expect the stock price to shoot up 10 per cent.

Over the long term, however, Icahn’s involvement appears only to lead to strong stock performance if he takes over the company within 18 months (which happened for over a third of target companies). From the blog:

‘We report that although the acquired group achieved significant positive stock market returns, the firms that remained independent suffered very negative (-60 per cent) returns.’

And the reason for this?

‘Although Icahn’s proposed changes could be responsible, as critics charge, for the performance of the latter group, we suggest that the success of many of these companies in fending off Icahn without enacting most of his proposed reforms is a more plausible explanation.’ 

‘At the same time, Icahn was successful in achieving at least one of his stated objectives in well over half of the cases in which the target companies remained independent,’ adds the post.

Source: HLS Forum on Corporate Governance and Financial Regulation

NOW WATCH: Money & Markets videos

Want to read a more in-depth view on the trends influencing Australian business and the global economy? BI / Research is designed to help executives and industry leaders understand the major challenges and opportunities for industry, technology, strategy and the economy in the future. Sign up for free at