Does Hedge Fund Managers’ Industry Experience Matter for Hedge Fund Activism?
59 Pages Posted: 25 Jun 2019 Last revised: 15 Nov 2021
Date Written: November 14, 2021
We study whether managers’ industry experience matters for hedge fund activism. We find that hedge fund managers with previous executive and outside director experience in target industries hold target shares longer and are more likely to serve as directors on target boards than those without such experience. Moreover, the targets of hedge funds whose managers have industry experience realize higher acquisition announcement returns and better operating performance, and show increases in payouts and reductions in CEO compensation and investment after acquisitions. The results suggest that managers’ industry expertise is an important source of value creation in hedge fund activism.
Keywords: hedge fund activism, hedge fund manager, industry experience, acquisition, target, announcement return, target policy
JEL Classification: G14, G23, G30, G34
Suggested Citation: Suggested Citation