The Impact of Hedge Fund Activism on the Target Firm's Existing Bondholders

2010 ◽  
Author(s):  
April Klein ◽  
Emanuel Zur
Keyword(s):  
Hedge Fund ◽  
Hedge Fund Activism ◽  
The Impact

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 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 Oxford Handbook of Hedge Funds

2021 ◽  
Keyword(s):  
Hedge Funds ◽  
Optimal Taxation ◽  
Private Equity ◽  
Hedge Fund ◽  
Global Perspective ◽  
Fund Flows ◽  
Theoretical Approaches ◽  
The Us ◽  
Hedge Fund Activism ◽  
The Impact

The Oxford Handbook of Hedge Funds provides a comprehensive look at the hedge fund industry from a global perspective. The chapters are organized into five main parts. After the introductory chapter in Part I, Part II begins in Chapter 2 with an analysis of the main factors that have affected the operation of hedge funds. Chapter 3 explains the concept of hedge fund flows. Chapter 4 examines hedge fund manager fees and contracts. Part III focuses on different types of hedge fund strategies. The broad array of strategies are summarized in Chapter 5. Chapter 6 empirically examines the performance of hedge fund strategies. Chapter 7 compares the strategies of hedge funds to private equity funds. Chapter 8 examines hedge fund herding. Chapter 9 examines hedge fund commodity trading advisors and leverage. Chapter 10 examines financial technology in hedge fund strategies. In Part IV, hedge fund activism in the US is examined in Chapter 11. The US and international literature on hedge fund activism is reviewed in different perspectives in Chapters 12 and 13. Case studies are provided in Chapter 14. The impact of activism on large company innovation is discussed in Chapter 15. In Part V, Chapter 16 examines whether hedge funds may engage in misreporting and fraud. Chapter 17 reviews work on hedge fund misconduct and detection. Chapter 18 discusses compliance among hedge funds. Chapter 19 examines theoretical approaches to hedge fund regulation. Chapter 20 examines optimal taxation. Chapter 21 examines hedge funds from a political economy context.

The Impact of Hedge Fund Activism on the Target Firm's Existing Bondholders

2011 ◽  
Vol 24 (5) ◽  
pp. 1735-1771 ◽  
Author(s):  
April Klein ◽  
Emanuel Zur
Keyword(s):  
Hedge Fund ◽  
Hedge Fund Activism ◽  
The Impact

The Effect of Hedge Fund Activism on Corporate Tax Avoidance

2012 ◽  
Vol 87 (5) ◽  
pp. 1493-1526 ◽  
Author(s):  
C. S. Agnes Cheng ◽  
Henry He Huang ◽  
Yinghua Li ◽  
Jason Stanfield
Keyword(s):  
Hedge Fund ◽  
Tax Avoidance ◽  
Securities And Exchange Commission ◽  
Data Availability ◽  
Corporate Tax ◽  
Track Record ◽  
Hedge Fund Activism ◽  
Tax Savings ◽  
Tax Changes ◽  
The Impact

ABSTRACT This paper examines the impact of hedge fund activism on corporate tax avoidance. We find that relative to matched control firms, businesses targeted by hedge fund activists exhibit lower tax avoidance levels prior to hedge fund intervention, but experience increases in tax avoidance after the intervention. Moreover, findings suggest that the increase in tax avoidance is greater when activists have a successful track record of implementing tax changes and possess tax interest or knowledge as indicated by their Securities and Exchange Commission (SEC) 13D filings. We also find that these greater tax savings do not appear to result from an increased use of high-risk and potentially illegal tax strategies, such as sheltering. Taken together, the results suggest that shareholder monitoring of firms, in the form of hedge fund activism, improves tax efficiency. JEL Classifications: G32; G34; H26. Data Availability: Data are available from sources identified in the text.

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