The Returns to Hedge Fund Activism
Duke University - Fuqua School of Business
Columbia Business School - Finance and Economics
University of San Diego School of Law
Randall S. Thomas
Vanderbilt University - Law School; European Corporate Governance Institute (ECGI)
Financial Analysts Journal, Vol. 64, No. 6, 2008
San Diego Legal Studies Paper No. 09-002
Hedge fund activism is a new form of investment strategy. Using a large hand-collected dataset from 2001 to 2006, we find that activist hedge funds in the United States propose strategic, operational, and financial remedies and attain success or partial success in two-thirds of the cases. The abnormal stock return upon announcement of activism is approximately 7 percent, with no reversal during the subsequent year. Target firms experience increases in payout and operating performance and higher CEO turnover after activism. We find large positive abnormal return to hedge fund activists, which is higher than the return to other equity-oriented hedge funds.
Keywords: Alternative Investments - Hedge Fund Strategies, Portfolio Management - Hedge Fund Strategies, Corporate Governance
Date posted: December 17, 2008
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