Activist Hedge Funds and Firm Disclosure

42 Pages Posted: 30 Sep 2015 Last revised: 13 Aug 2019

See all articles by Jing Chen

Jing Chen

Stevens Institute of Technology - School of Business

Michael J. Jung

University of Delaware - Accounting & MIS

Date Written: September 28, 2015


This study examines whether firms’ disclosure decisions are affected by the presence of activist hedge funds. Using a large sample of firms that experienced increases in ownership by activist hedge funds, we find that firms are more likely to cease providing financial guidance or reduce the information in the guidance in the quarter subsequent to new investment by activist hedge funds. These results hold even for firms that experienced good quarters and consistently provided guidance in previous quarters. Since guidance has been shown to be beneficial to capital market participants in many ways, reduced guidance has meaningful market implications. Our findings highlight a negative and possible unintended consequence of activist hedge funds’ investment in firms, which provides some counterbalance to the numerous positive consequences documented in the prior literature on hedge fund activism.

Keywords: Activist Hedge Funds, Shareholder Activism, Management Guidance, Disclosure

JEL Classification: M41, G23, G34

Suggested Citation

Chen, Jing and Jung, Michael J., Activist Hedge Funds and Firm Disclosure (September 28, 2015). Review of Financial Economics, April 2016, Vol. 29, pp. 52-63. , Available at SSRN:

Jing Chen

Stevens Institute of Technology - School of Business ( email )

Hoboken, NJ 07030
United States

Michael J. Jung (Contact Author)

University of Delaware - Accounting & MIS ( email )

Alfred Lerner College of Business and Economics
Newark, DE 19716
United States

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