How Does Past Experience Impact Hedge Fund Activism? forthcoming, Journal of Financial and Quantitative Analysis

Abstract

Hedge fund activists transfer relevant prior work experience to their activism campaigns.
Categorizing activists based on past employment at investment banks (generalists), private equity or special situations partnerships (specialists), or other firms (non-financial experts), we relate activists’ prior work experience to their choices and outcomes. Both generalists with codifiable skills and specialists with tacit skills contribute to successful outcomes, but differences in these skills lead to differences in activism processes. Activist choices, market responses, target firm responses, and
procedural aspects of activism vary with activist identity. Our analysis examines activists’
heterogeneous skills and highlights their importance in shaping activist interventions.

Keywords: Hedge fund activism, Manager skill, Managerial Experience

JEL Classification: G30, G32, G34