Abstract

http://ssrn.com/abstract=2409404
 


 



Shareholder Power and Corporate Innovation: Evidence from Hedge Fund Activism


Alon Brav


Duke University - Fuqua School of Business

Wei Jiang


Columbia Business School - Finance and Economics

Song Ma


Duke University - Fuqua School of Business

Xuan Tian


Indiana University - Kelley School of Business - Department of Finance

December 2014

Kelley School of Business Research Paper No. 2014-05

Abstract:     
This paper studies how hedge fund activism reshapes corporate innovation. We find that firms targeted by hedge fund activists experience an improvement in innovation efficiency after intervention. Despite reduction in R&D expenditures, target firms experience increases in innovation output (measured by both patent counts and citations), with stronger effects seen among firms starting with more diversified innovation portfolios. We further show that the reallocation of innovative resources and the redeployment of human capital contribute to the refocusing of the scope of innovation and lead to gains in efficiency. Finally, we establish that the link between hedge fund interventions and improvements in innovation efficiency is a by-product of asset reallocations triggered by activist interventions at the target firms.

Number of Pages in PDF File: 49

Keywords: Hedge fund activism, Innovation, Resource allocation, Human capital redeployment

JEL Classification: G23, G34, O31

working papers series





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Date posted: March 17, 2014 ; Last revised: December 18, 2014

Suggested Citation

Brav, Alon and Jiang, Wei and Ma, Song and Tian, Xuan, Shareholder Power and Corporate Innovation: Evidence from Hedge Fund Activism (December 2014). Kelley School of Business Research Paper No. 2014-05. Available at SSRN: http://ssrn.com/abstract=2409404 or http://dx.doi.org/10.2139/ssrn.2409404

Contact Information

Alon Brav
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)

Song Ma
Duke University - Fuqua School of Business ( email )
Box 90120
Durham, NC 27708-0120
United States
Xuan Tian (Contact Author)
Indiana University - Kelley School of Business - Department of Finance ( email )
1309 E. Tenth Street
Bloomington, IN 47405
United States
812-8553420 (Phone)
824-8555875 (Fax)
HOME PAGE: http://kelley.iu.edu/tianx

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