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What is Special About Hedge Fund Activism? Evidence from 13-D Filings

54 Pages Posted: 8 Oct 2014 Last revised: 13 Nov 2014

Ulf von Lilienfeld-Toal

Luxembourg School of Finance

Jan Schnitzler

VU University Amsterdam - Faculty of Economics and Business Administration; Tinbergen Institute - Tinbergen Institute Amsterdam (TIA)

Date Written: June 4, 2014

Abstract

We provide an empirical assessment of two incentivizing mechanisms that help overcome agency costs caused by the separation of ownership and control: namely inside ownership and external blockholdings. Our findings suggest that defining features of these mechanisms, like high ownership and costly (active) effort provision, are important determinants for a successful outcome. On the other hand, the type of activist seems to be of minor importance only. We find that announcements of activist hedge fund holdings are not accompanied with larger abnormal returns than our base-group of activist investors. The only group standing apart with a smaller effect are financial institutions. Our sample covers all Schedule 13D filings from 1985-2012. Incidences of active blockholders are very frequent with over 10000 filings per year (1900 initial filings). Additionally, these events are associated with substantial abnormal returns, 7% for initial lings (4% for all filings).

Keywords: investor activism, activist blockholders, hedge funds, stock ownership

Suggested Citation

Lilienfeld-Toal, Ulf von and Schnitzler, Jan, What is Special About Hedge Fund Activism? Evidence from 13-D Filings (June 4, 2014). Swedish House of Finance Research Paper No. 14-16. Available at SSRN: https://ssrn.com/abstract=2506704 or http://dx.doi.org/10.2139/ssrn.2506704

Ulf Von Lilienfeld-Toal

Luxembourg School of Finance ( email )

162a, avenue de la Faïencerie
Luxembourg-Limpertsberg, L-1511
Luxembourg

Jan Schnitzler (Contact Author)

VU University Amsterdam - Faculty of Economics and Business Administration ( email )

De Boelelaan 1105
Amsterdam, 1081HV
Netherlands

Tinbergen Institute - Tinbergen Institute Amsterdam (TIA) ( email )

Gustav Mahlerplein 117
Amsterdam, 1082 MS
Netherlands

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