Hostile Resistance to Hedge Fund Activism

50 Pages Posted: 7 Jul 2016 Last revised: 17 Apr 2018

See all articles by Nicole M. Boyson

Nicole M. Boyson

Northeastern University - D’Amore-McKim School of Business

Pegaret Pichler

Northeastern University, D’Amore-McKim School of Business, Finance Area

Date Written: March 15, 2018

Abstract

When facing hedge fund activists, target firms often fight back. Targets with agency problems and those confronting the threat of investor coordination frequently engage in hostile resistance by implementing governance changes associated with managerial entrenchment. The market negatively responds to hostile resistance, and unless hedge funds counter-resist, these campaigns have worse operating performance, faster activist exit, and fewer mergers than do campaigns without hostile target resistance. By contrast, when hedge funds counter-resist with proxy fights, lawsuits, or unsolicited tender offers, the impact of hostile target resistance is reversed, and these campaigns have similar outcomes to campaigns without hostile target resistance.

Keywords: hedge fund activism, target firm resistance

JEL Classification: G23, G30, G34

Suggested Citation

Boyson, Nicole M. and Pichler, Pegaret, Hostile Resistance to Hedge Fund Activism (March 15, 2018). Review of Financial Studies, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2805493 or http://dx.doi.org/10.2139/ssrn.2805493

Nicole M. Boyson (Contact Author)

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

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

Pegaret Pichler

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

Boston, MA 02115
United States

HOME PAGE: http://www.northeastern.edu/pegaretpichler

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