Hedge Fund Activism and Corporate M&A Decisions

78 Pages Posted: 29 Aug 2018 Last revised: 28 Nov 2020

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: November 16, 2020

Abstract

This paper shows that hedge fund activism is associated with a decrease in mergers and acquisitions (M&A) and offer premiums and an increase in stock and operating performance. Activist hedge funds improve target firms’ M&A performance by reducing poor M&A, diversifying M&A, and the M&A of firms with multiple business segments. Activist hedge funds improve target firms’ M&A decisions by influencing their governance practices. We show that our results are unlikely driven by selection bias. Overall, activist hedge funds play an important role in the market for corporate control by increasing the efficiency of target firms’ M&A activities through interventions.

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 (November 16, 2020). 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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