The Role of the Media in Hedge Fund Activism: Evidence from a Natural Experiment

Using News Corp's acquisition of Dow Jones & Co. in 2007 as a natural experiment, we study the role of the media in hedge fund activism. We hypothesize that hedge fund activists influence media reporting on target firms through their connected media outlets prior to their activism campaigns. We find that following the News Corp-Dow Jones takeover, the change in the proportion of negative news articles on a target firm within 60 days prior to the targeting event is 14.5% higher for firms targeted by connected funds, which hold News Corp's shares, than for those targeted by unconnected funds. Moreover, negative pre-targeting sentiment is more severe when activists own more shares in News Corp, whereas it is less severe for target firms with higher advertising expenditures in Dow Jones media outlets. Negative media sentiment helps activists to achieve their campaign objectives and leads to higher long-term stock returns.

Keywords: hedge fund activism, governance, media, sentiment JEL Classification: G30, G34

JEL Classification: G30, G34

Suggested Citation: Suggested Citation

Wang, Xinjie and Wu, Ge and Zhang, Bohui and Li, Ming, The Role of the Media in Hedge Fund Activism: Evidence from a Natural Experiment (September 01, 2025). Available at SSRN: https://ssrn.com/abstract=3584071 or http://dx.doi.org/10.2139/ssrn.3584071