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

Xuan Tian


Indiana University - Kelley School of Business - Department of Finance

March 14, 2014

Kelley School of Business Research Paper No. 2014-05

Abstract:     
We examine whether hedge fund activism affects corporate innovation. We find that firms targeted by hedge fund activists experience an improvement in innovation efficiency within three years after the intervention as evidenced by a significant drop in R&D spending but an increase in innovation output measured by both patent counts and citations. We then show that hedge fund activists improve target firms’ innovation efficiency via the reallocation of innovative resources and the redeployment of human capital. Finally, we show that the link between hedge fund interventions and improvements in innovation efficiency is potentially driven by firms’ assets reallocation triggered by activists. Our paper is the first study that sheds light on the real effect of strengthened shareholder power in reshaping corporate innovation.

Number of Pages in PDF File: 40

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

JEL Classification: G23, G34, O31

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Date posted: March 17, 2014  

Suggested Citation

Brav, Alon and Jiang, Wei and Tian, Xuan, Shareholder Power and Corporate Innovation: Evidence from Hedge Fund Activism (March 14, 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)

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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