An important milestone often reached in the life of an activist engagement is entering into a “settlement” agreement between the activist and the target's board. Using a comprehensive hand-collected data set, we analyze the drivers, nature, and consequences of such settlement agreements. Settlements are more likely when the activist has a credible threat to win board seats in a proxy fight and when incumbents’ reputation concerns are stronger. Consistent with incomplete contracting, face-saving benefits, and private information considerations, settlements commonly do not contract directly on operational or leadership changes sought by the activist but rather on board composition changes. Settlements are accompanied by positive stock price reactions, and they are subsequently followed by changes of the type sought by activists, including CEO turnover, higher shareholder payouts, and improved operating performance. We find no evidence to support concerns that settlements enable activists to extract rents at the expense of other investors. Our analysis provides a look into the “black box” of activist engagements and contributes to understanding how activism brings about changes in target companies.

The promise of contingent convertible capital securities (CoCos) as a ”bail-in” solution has been the subject of considerable theoretical analysis and debate, but little is known about their effects in practice. We undertake the first comprehensive empirical analysis of bank CoCo issues, a market segment that comprises over 730 instruments totaling $521 billion. Four main findings emerge: (1) the propensity to issue a CoCo is higher for larger and better capitalized banks; (2) CoCo issues result in a statistically significant decline in issuers’ CDS spread, indicating that they generate risk-reduction benefits and lower costs of debt (this is especially true for CoCos that convert into equity, have mechanical triggers, and are classified as Additional Tier 1 instruments); (3) CoCos with only discretionary triggers do not have a significant impact on CDS spreads; and (4) CoCo issues have no statistically significant impact on stock prices, except for principal write-down CoCos with a high trigger level, which have a positive effect.

For years, the Securities and Exchange Commission (SEC) accidentally distributed securities disclosures to some investors before the public. We exploit this setting, which is unique because the delay until public disclosure was exogenous and the private information window was well defined, to study informed trading with a random stopping time. Trading intensity and the pace at which prices incorporate information decrease with the expected delay until public release, but the relation between trading intensity and time elapsed varies with traders' learning process. Noise trading and relative information advantage play similar roles as in standard microstructure theories assuming a fixed time window.