Hedge Fund Activism, Corporate Governance, and Firm Performance
Alon Brav, Duke University
Wei Jiang, Columbia University
Frank Partnoy, University of San Diego
Randall Thomas, Vanderbilt University

Using a large hand-collected data set from 2001 to 2006, we find that activist hedge funds in the U.S. propose strategic, operational, and financial remedies and attain success or partial success in two-thirds of the cases. Hedge funds seldom seek control and in most cases are no confrontational. The abnormal return around the announcement of activism is approximately 7%, with no reversal during the subsequent year. Target firms experience increases in payout, operating performance, and higher CEO turnover after activism. Our analysis provides important new evidence on the mechanisms and effects of informed shareholder monitoring.

The corporate activism of hedge funds has increased substantially in the last few years. This study shows that their activities very often have produced benefits for themselves and for other shareholders. Accordingly, these funds appear to have improved corporate efficiency. The results will interest our members who engage in corporate activism, as well as those who benefit from it.


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