I'm Disinclined to Acquiesce to Your Request: Managerial Resistance Against Activism via Acquisition

Shareholder activism has emerged as a prominent threat for corporate managers, but extant research overlooks how managers resist the pressure from activist investors. Since overt resistance can lead to even more aggressive counter-resistance by activist investors, managers are theorized to leverage their discretion to resist indirectly, such as by pursuing acquisitions. We argue and demonstrate that managers who are under activist pressure undertake larger and diversifying acquisitions, which can help them further embed themselves and weaken activists’ footholds at the firm by preemptively spending firm resources, diluting activist stakes, increasing operational complexity, and deterring potential buyers.