Dissatisfied Investors and Hedge Fund Activism

65 Pages Posted: 19 Sep 2017 Last revised: 23 Feb 2018

See all articles by Yazhou He

Yazhou He

University of Manchester

Date Written: September 17, 2017

Abstract

This paper utilizes a rich literature on institutional investors' governance roles and develops simple measures of institutional discontent expressed through holding, trading and voice channels to predict hedge fund activism target selection. Discontent expressed through all three channels leads to subsequent targeting. Medium sized dissatisfied owners and sellers seem to be the main driving force and institutions' discretionary disagreement on management compensation and governance related proposals have the highest explanatory power. Activists are more likely to gain higher announcement returns and threaten to take hostile actions against management with more discontent institutional investors in the target companies. Discontent institutions are more likely to vote pro-activist in the annual meetings after campaigns.

Keywords: Hedge fund activism, Corporate governance, Institutional investors

JEL Classification: G30, G23, G34

Suggested Citation

He, Yazhou, Dissatisfied Investors and Hedge Fund Activism (September 17, 2017). Available at SSRN: https://ssrn.com/abstract=3038393 or http://dx.doi.org/10.2139/ssrn.3038393

Yazhou He (Contact Author)

University of Manchester ( email )

Oxford Road
Manchester, M13 9PL
United Kingdom

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