Activism Mergers

45 Pages Posted: 23 Oct 2015 Last revised: 1 Nov 2017

See all articles by Nicole M. Boyson

Nicole M. Boyson

Northeastern University - D’Amore-McKim School of Business

Nickolay Gantchev

Southern Methodist University (SMU) - Finance Department; European Corporate Governance Institute (ECGI)

Anil Shivdasani

University of North Carolina Kenan-Flagler Business School

Date Written: October 31, 2017

Abstract

Shareholder value creation from hedge fund activism occurs primarily by influencing takeover outcomes for targeted firms. Controlling for selection decisions, activist interventions substantially increase the probability of a takeover offer. Third-party bids for targets have higher returns, premia, and completion rates, but these patterns reverse when the activist is the bidder. Failed bids for activism targets lead to improvements in operating performance, financial policy, and positive long-term abnormal returns, suggesting that activism enhances value. The positive long-term performance from hedge fund activism arises from monitoring target management during merger and acquisition contests and not from target undervaluation or bidder overpayment.

Keywords: Hedge fund activism, Shareholder activism, Corporate governance, Mergers and acquisitions, Institutional investors

JEL Classification: G14, G23, G34

Suggested Citation

Boyson, Nicole M. and Gantchev, Nickolay and Shivdasani, Anil, Activism Mergers (October 31, 2017). Journal of Financial Economics (JFE), Forthcoming. Available at SSRN: https://ssrn.com/abstract=2677416 or http://dx.doi.org/10.2139/ssrn.2677416

Nicole M. Boyson

Northeastern University - D’Amore-McKim School of Business ( email )

360 Huntington Ave.
Boston, MA 02115
617-373-4775 (Phone)

Nickolay Gantchev (Contact Author)

Southern Methodist University (SMU) - Finance Department ( email )

United States
214-768-4128 (Phone)

European Corporate Governance Institute (ECGI) ( email )

HOME PAGE: http://www.ecgi.org

Anil Shivdasani

University of North Carolina Kenan-Flagler Business School ( email )

Kenan-Flagler Business School
Chapel Hill, NC 27599-3490
United States
919-962-3182 (Phone)
919-962-2068 (Fax)

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