The Returns to Hedge Fund Activism in Germany

42 Pages Posted: 29 Jan 2015

See all articles by Wolfgang Bessler

Wolfgang Bessler

Justus-Liebig-University Giessen

Wolfgang Drobetz

University of Hamburg

Julian Holler

University of Giessen - Center for Finance and Banking

Date Written: January 2015

Abstract

Recent regulatory changes in the German financial system shifted corporate control activities from universal banks to other capital market participants. Particularly hedge funds took advantage of the resulting control vacuum by acquiring stakes in weakly governed and less profitable firms. We document that, on average, hedge funds increased shareholder value in the short‐ and long‐run. However, more aggressive hedge funds generated only initially higher returns and their outperformance quickly reversed, whereas non‐aggressive hedge funds ultimately outperformed their aggressive peers. These findings suggest that aggressive hedge funds attempt to expropriate the target firm's shareholders by exiting at temporarily increased share prices.

Keywords: Corporate governance, hedge funds, event studies, long‐run performance

Suggested Citation

Bessler, Wolfgang and Drobetz, Wolfgang and Holler, Julian, The Returns to Hedge Fund Activism in Germany (January 2015). European Financial Management, Vol. 21, Issue 1, pp. 106-147, 2015. Available at SSRN: https://ssrn.com/abstract=2557136 or http://dx.doi.org/10.1111/eufm.12004

Wolfgang Bessler (Contact Author)

Justus-Liebig-University Giessen ( email )

Center for Finance and Banking
Licher Strasse 74
Giessen, D-35394
Germany
49-641-9922460 (Phone)
49-641-9922469 (Fax)

HOME PAGE: http://wiwi.uni-giessen.de/home/Bessler/

Wolfgang Drobetz

University of Hamburg ( email )

Moorweidenstrasse 18
Hamburg, 20148
Germany

Julian Holler

University of Giessen - Center for Finance and Banking ( email )

Licher Strasse 74
Pouring
Giessen, D-35394
Germany

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