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Hedge Fund Activism, Corporate Governance, and Firm PerformanceAlon P. BravDuke University - Fuqua School of Business Wei JiangColumbia Business School - Finance and Economics Randall S. ThomasVanderbilt University - Law School; European Corporate Governance Institute (ECGI) Frank PartnoyUniversity of San Diego School of Law May 2008 Journal of Finance, Vol. 63, p. 1729, 2008 ECGI - Finance Working Paper No. 139/2006 Vanderbilt Law and Economics Research Paper No. 07-28 FDIC Center for Financial Research Working Paper No. 2008-06 Abstract: Using a large hand-collected dataset 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 nonconfrontational. 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.
Number of Pages in PDF File: 56 Keywords: Hedge Fund, Activism, Governance JEL Classification: G14, G23, G3 Accepted Paper SeriesDate posted: April 5, 2007Suggested CitationContact Information
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