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http://ssrn.com/abstract=2022904
 
 

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The Real Effects of Hedge Fund Activism: Productivity, Asset Allocation, and Industry Concentration


Alon Brav


Duke University - Fuqua School of Business

Wei Jiang


Columbia Business School - Finance and Economics

Hyunseob Kim


Cornell University - Samuel Curtis Johnson Graduate School of Management

May 23, 2013


Abstract:     
This paper studies the long-term effect of hedge fund activism on the productivity of target firms using plant-level information from the U.S. Census Bureau. A typical target firm improves its production efficiency within three years after the intervention, and this improvement is pronounced in industries with low concentration. By following plants that were sold post-intervention we also find that efficient capital redeployment is an important channel via which activists create value. We further find that employees of target firms experience a reduction in work hours and stagnation in wages despite an increase in labor productivity. Additional tests refute alternative explanations that attribute the improvement to management’s voluntary reform, industry consolidation shocks, and hedge funds’ stock picking. The overall evidence is consistent with a real long-term effect of hedge fund intervention on target firms’ fundamentals.

Number of Pages in PDF File: 48

Keywords: Hedge fund activism, Governance, Productivity, Capital Reallocation, Employment

JEL Classification: G12, G23, G34

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Date posted: March 15, 2012 ; Last revised: May 23, 2013

Suggested Citation

Brav, Alon and Jiang, Wei and Kim, Hyunseob, The Real Effects of Hedge Fund Activism: Productivity, Asset Allocation, and Industry Concentration (May 23, 2013). Available at SSRN: http://ssrn.com/abstract=2022904 or http://dx.doi.org/10.2139/ssrn.2022904

Contact Information

Alon Brav (Contact Author)
Duke University - Fuqua School of Business ( email )
Box 90120
Durham, NC 27708-0120
United States
919-660-2908 (Phone)
919-684-2818 (Fax)
Wei Jiang
Columbia Business School - Finance and Economics ( email )
3022 Broadway
New York, NY 10027
United States
(212) 854-5553 (Phone)

Hyunseob Kim
Cornell University - Samuel Curtis Johnson Graduate School of Management ( email )
Ithaca, NY 14853
United States

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