Hedge Fund Activism and Corporate M&A Decisions

64 Pages Posted: 29 Aug 2018 Last revised: 10 Jan 2019

See all articles by Szu-Yin (Jennifer) Wu

Szu-Yin (Jennifer) Wu

State University of New York, University at Buffalo

Kee H. Chung

State University of New York at Buffalo - School of Management

Date Written: January 8, 2019

Abstract

This paper shows that hedge fund activism leads to lower M&A activities, lower takeover premiums, more favorable market reactions to M&A announcements, and better post-M&A stock and operating performance using Schedule 13D filings by hedge funds and M&A announcements made by US companies from 1993 to 2015. We explore various governance variables (i.e., board appointment, CEO turnover, board independence, and board structure) as possible mechanisms through which hedge fund activism affects M&A performance. Overall, our results suggest that hedge fund activism increases shareholder wealth by forcing corporate M&A to be more efficient and disciplined (e.g., fewer but better acquisitions).

Keywords: Hedge Fund Activism, M&A Performance, Schedule 13D Filings, Event Study, Abnormal Stock Returns, Selection Bias

JEL Classification: G23, G32, G34

Suggested Citation

Wu, Szu-Yin (Jennifer) and Chung, Kee H., Hedge Fund Activism and Corporate M&A Decisions (January 8, 2019). Available at SSRN: https://ssrn.com/abstract=3235431 or http://dx.doi.org/10.2139/ssrn.3235431

Szu-Yin (Jennifer) Wu

State University of New York, University at Buffalo ( email )

349 Jacobs Management Center
Buffalo, NY 14260
United States
7166453276 (Phone)
14260 (Fax)

Kee H. Chung (Contact Author)

State University of New York at Buffalo - School of Management ( email )

Buffalo, NY 14260
United States
716-645-3262 (Phone)
716-645-3823 (Fax)

HOME PAGE: http://mgt.buffalo.edu/faculty/academic-departments/finance/faculty/kee-chung.html

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