scholarly journals Institutional Investors and Hedge Fund Activism

2020 ◽  
Author(s):  
Simi Kedia ◽  
Laura Starks ◽  
Xianjue Wang
Keyword(s):  
Stock Returns ◽  
Institutional Investors ◽  
Operating Performance ◽  
Hedge Fund ◽  
Target Firms ◽  
Hedge Fund Activism ◽  
Institutional Shareholders

Abstract Hedge fund activists have ambiguous relationships with the institutional shareholders in their target firms. While some support their activities, others counter their actions. Due to their relatively small holdings in target firms, activists typically need the cooperation of other institutional shareholders that are willing to influence the activists’ campaign success. We find the presence of “activism-friendly” institutions as owners is associated with an increased probability of being a target, higher long-term stock returns, and higher operating performance. Overall, we provide evidence suggesting the composition of a firm’s ownership has significant effects on hedge fund activists’ decisions and outcomes.

Hedge Fund Activism and Corporate M&A Decisions

2021 ◽  
Author(s):  
Szu-Yin (Jennifer) Wu ◽  
Kee H. Chung
Keyword(s):  
Mergers And Acquisitions ◽  
Selection Bias ◽  
Hedge Funds ◽  
Operating Performance ◽  
Hedge Fund ◽  
Corporate Control ◽  
Market For Corporate Control ◽  
Target Firms ◽  
Governance Practices ◽  
Hedge Fund Activism

This paper shows that hedge fund activism is associated with a decrease in mergers and acquisitions (M&A) and offer premiums and an increase in stock and operating performance. Activist hedge funds improve target firms’ M&A performance by reducing poor M&A, diversifying M&A, and the M&A of firms with multiple business segments. Activist hedge funds improve target firms’ M&A decisions by influencing their governance practices. We show that our results are unlikely driven by selection bias. Overall, activist hedge funds play an important role in the market for corporate control by increasing the efficiency of target firms’ M&A activities through interventions. This paper was accepted by Gustavo Manso, finance.

scholarly journals The Long-Term Effects of Hedge Fund Activism

2013 ◽  
Author(s):  
Lucian A. Bebchuk ◽  
Alon P. Brav ◽  
Wei Jiang
Keyword(s):  
Hedge Fund ◽  
Long Term Effects ◽  
Hedge Fund Activism

Gone Global: The International Diffusion of Hedge Fund Activism

2021 ◽  
pp. 317-367
Author(s):  
Ruth V. Aguilera ◽  
Ryan Federo ◽  
Yuliya Ponomareva
Keyword(s):  
Hedge Fund ◽  
Research Gaps ◽  
Global Context ◽  
International Diffusion ◽  
Target Firms ◽  
The Us ◽  
Research Questions ◽  
Country Differences ◽  
Cross Country ◽  
Hedge Fund Activism

After decades of being primarily a US-based phenomenon, the globalization of hedge fund (HF) activism is increasing at an unprecedented speed. This chapter reviews the empirical research on HF activism by systematically comparing studies conducted in the US and outside the US context. The nascent body of work on HF activism is categorized and discussed within four research sub-streams: the antecedents of HF activism; HF activists’ tactics; the responses of target firms to HF activist campaigns, and the outcomes of the latter for HF activists, target firms, and other stakeholders. Six select cases of interventions by a prominent HF activist illustrate the cross-country differences in hedge fund activist practices outlined in the literature review. The chapter concludes by outlining current research gaps and formulating research questions that could advance our knowledge on hedge fund activism in a global context.

Hedge Fund Activism vs Other Activist Investors

2021 ◽  
pp. 252-282
Author(s):  
Ulf von Lilienfeld-Toal ◽  
Jan Schnitzler
Keyword(s):  
Empirical Analysis ◽  
Hedge Funds ◽  
Hedge Fund ◽  
Empirical Literature ◽  
Comparative Approach ◽  
Large Sample ◽  
Shareholder Proposals ◽  
Target Firms ◽  
Hedge Fund Activism ◽  
The Impact

This chapter reviews the growing empirical literature on shareholder activism by hedge funds. The aim is a comparative approach contrasting the impact of hedge fund activism on target firms with outcomes for other types of activist investors. Following recent research, the chapter provides an empirical analysis based on the disclosure of equity blockholdings by activist investors in a large sample of all US listed companies. In addition, it summarizes which types of investors engage in other events linked to activism, such as takeovers, proxy contests, or shareholder proposals. Overall, there is evidence that not only hedge funds but also other types of investors can be effective monitors, but there are nuanced differences with respect to targeting decisions and payout policies.

scholarly journals Institutional Shareholdings and Financial Characteristics of Malaysian Listed Companies

2020 ◽  
Author(s):  
Shamsul Naharabdullah ◽  
Mohd Azlan Yahya ◽  
Faisol Elham
Keyword(s):  
Institutional Investors ◽  
Listed Companies ◽  
Financial Ratios ◽  
Short Term ◽  
Growth Ratio ◽  
Primary Motivation ◽  
The Mean ◽  
Financial Characteristics ◽  
Institutional Shareholders

This study attempts to investigate the extent to which the financial characteristics of firms are related to institutional shareholdings. The primary motivation to carry out the study comes from an earlier paper by Hessel and Norman (1992), which showed that seven financial ratios discriminated between strongly-held and institutionally-neglected firms. As an extension of the study, the present study seeks to investigate the seven financial ratios among Malaysian companies by identifying differences in the means of the seven ratios between a group of companies with substantial institutional shareholdings against another group of companies with negligible institutional shareholdings. The findings, from a sample of KLSE listed companies, broadly support the findings by Hessel and Norman (1992), in which firms with significant institutional shareholdings exhibited a significantly higher profitability ratio against firms that were neglected by institutional investors.. This suggested that institutional investors placed greater emphasis on a firm's short-term results. Our evidence also did not indicate institutional shareholders' direct involvement in ensuring a firm's long-term growth and competitiveness, as shown by the insignificant differences in the mean of growth ratio between firms that had significant institutional shareholdings and those that were neglected by institutional investors.  

scholarly journals The Long-Term Effects of Hedge Fund Activism

2015 ◽  
Author(s):  
Lucian Bebchuk ◽  
Alon Brav ◽  
Wei Jiang
Keyword(s):  
Hedge Fund ◽  
Long Term Effects ◽  
Hedge Fund Activism

scholarly journals The impact of hedge fund activism on target firm performance, executive compensation and executive wealth

2017 ◽  
Vol 6 (3) ◽  
pp. 14-28 ◽  
Author(s):  
Andrew Carrothers
Keyword(s):  
Firm Performance ◽  
Executive Compensation ◽  
Firm Value ◽  
Hedge Fund ◽  
Share Price ◽  
Target Firm ◽  
Increased Risk ◽  
Target Firms ◽  
Hedge Fund Activism ◽  
The Impact

This paper examines the relationship between hedge fund activism and target firm performance, executive compensation, and executive wealth. It introduces a theoretical framework that describes the activism process as a sequence of discrete decisions. The methodology uses regression analysis on a matched sample based on firm size, industry, and market-to-book ratio. All regressions control for industry and year fixed effects. Schedule 13D Securities and Exchange Commission (SEC) filings are the source for the statistical sample of hedge fund target firms. I supplement that data with target firm financial, operating, and share price information from the CRSP-COMPUSTAT merged database. Activist hedge funds target undervalued or underperforming firms with high profitability and cash flows. They do not avoid firms with powerful CEOs. Leverage, executive compensation, pay for performance and CEO turnover increase at target firms after the arrival of the activist hedge fund. Target firm executives’ wealth is more sensitive to changes in share price after hedge fund activism events suggesting that the executive team experiences changes to their compensation structure that provides incentive to take action to improve returns to shareholders. The top executives reap rewards for increasing firm value but not for increased risk taking.

The Value-Extracting Outsiders

2019 ◽  
pp. 127-155
Author(s):  
William Lazonick ◽  
Jang-Sup Shin
Keyword(s):  
Institutional Investors ◽  
Hedge Fund ◽  
Proxy Voting ◽  
Current State ◽  
Hedge Fund Activism

This chapter exposes a particularly aggressive species of activist shareholder, hedge-fund activists, who are ready to take advantage of changes in proxy-voting and engagement rules to enhance their value-extracting power and to build private “war chests” that serve to enhance their value-extracting power even more. It examines the evolution and the current state of hedge-fund activism. After explaining this phenomenon’s origin and expansion, it investigates in particular Carl Icahn’s transition from the most representative corporate raider to one of the most “successful” hedge-fund activists in order to delineate vividly the characteristics and methods of the new value-extracting outsiders. It also examines how “co-investments” between hedge-fund activists and institutional investors are carried out.

Antecedents of hedge fund activism in French listed target firms

2017 ◽  
Vol 42 ◽  
pp. 1315-1326 ◽  
Author(s):  
Nouha Ben Arfa ◽  
Majdi Karmani ◽  
Daniel Labaronne
Keyword(s):  
Hedge Fund ◽  
Target Firms ◽  
Hedge Fund Activism
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