Do Hedge Fund Activists Affect Firms Differently than Other Activists? Evidence from the Long-term Effects of Corporate Divestitures*

51 Pages Posted: 4 Jan 2019 Last revised: 29 Apr 2020

See all articles by Jie (Michael) Guo

Jie (Michael) Guo

Durham Business School

Joshua Shemesh

Monash University - Department of Banking and Finance; Financial Research Network (FIRN)

Vinay Utham

Brunel University London

George Jiaguo Wang

Lancaster University Management School; New York University - Stern School of Business

Date Written: October 10, 2019

Abstract

Using hand-collected data on activist-initiated divestitures, we compare the long- term effects of hedge fund activists on their targets with that of other shareholder activists. We show that the distinguishing features of hedge funds are associated with substantial improvements in target-firm profitability after selloffs involving large asset reductions. In addition, following the divestiture completion, hedge fund activists are not more likely to initiate the sale of their target firms, nor do they reduce their holdings faster than other activists. Our results suggest that among activists, hedge funds can be more efficient “shepherds” creating long-term value, rather than “wolves” seeking short-term profits.

Keywords: Shareholder Activism; Hedge Funds; Divestitures; Spinoffs

JEL Classification: G23; G34

Suggested Citation

Guo, Jie Michael and Shemesh, Joshua and Utham, Vinay and Wang, George Jiaguo, Do Hedge Fund Activists Affect Firms Differently than Other Activists? Evidence from the Long-term Effects of Corporate Divestitures* (October 10, 2019). Available at SSRN: https://ssrn.com/abstract=3303342 or http://dx.doi.org/10.2139/ssrn.3303342

Jie Michael Guo

Durham Business School ( email )

Old Elvet
Mill Hill Lane
Durham, Durham DH1 3HP
United Kingdom

Joshua Shemesh

Monash University - Department of Banking and Finance ( email )

Melbourne
Australia

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

Vinay Utham

Brunel University London ( email )

Kingston Lane
Eastern Gateway Building
Uxbridge, Middlesex UB8 3PH
United Kingdom

George Jiaguo Wang (Contact Author)

Lancaster University Management School ( email )

Department of Accounting and Finance
Lancaster University Management School
Lancaster, Lancashire LA1 4YX
United Kingdom
+44 1524 592 577 (Phone)

HOME PAGE: http://www.lancaster.ac.uk/lums/people/george-wang

New York University - Stern School of Business ( email )

44 West 4th Street
Suite 9-160
New York, NY NY 10012
United States

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
139
Abstract Views
1,430
rank
241,737
PlumX Metrics