Hedge Fund Activism and Corporate M&A Decisions
64 Pages Posted: 29 Aug 2018 Last revised: 10 Jan 2019
Date Written: January 8, 2019
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: Suggested Citation