Against All Odds: Hedge Fund Activism in Controlled Companies

72 Pages Posted: 10 Jul 2015 Last revised: 18 Apr 2016

See all articles by Kobi Kastiel

Kobi Kastiel

Tel Aviv University - Buchmann Faculty of Law; Harvard Law School, Program on Corporate Governance

Date Written: July 9, 2015

Abstract

The importance of shareholder activism in widely held public companies is already broadly recognized. Less well understood, however, is the role that activist hedge funds play in public companies with a controlling shareholder, and the common view has been that dispersed stock ownership is typically a precondition for activist intervention. To fill this gap, this Article presents the first comprehensive account of hedge fund activism in controlled companies in the United States. Using empirical data and illustrative examples from recent years, the Article finds a surprising number of activist engagements with controlled companies, and unveils the variety of channels through which activism is deployed as well as the limitations of these channels. It concludes by offering regulators and institutional investors some suggestions for further empowering activists in controlled companies, such as granting investors unaffiliated with the controllers the right to elect minority directors.

Keywords: Corporate governance, controlled companies, shareholder activism, corporate law, minority director, dual-class

JEL Classification: K22

Suggested Citation

Kastiel, Kobi, Against All Odds: Hedge Fund Activism in Controlled Companies (July 9, 2015). Columbia Business Law Review, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2628987 or http://dx.doi.org/10.2139/ssrn.2628987

Kobi Kastiel (Contact Author)

Tel Aviv University - Buchmann Faculty of Law ( email )

Ramat Aviv
Tel-Aviv, 6997801
Israel

HOME PAGE: http://www.law.tau.ac.il/Eng/?CategoryID=242&ArticleID=548

Harvard Law School, Program on Corporate Governance ( email )

1575 Massachusetts
Cambridge, MA 02138
United States

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