Does Hedge Fund Managers’ Industry Experience Matter for Hedge Fund Activism?

Brick, I., Chen, Y., Kang, J., Kim, J., 2024. Does Hedge Fund Managers’ Industry Experience Matter for Hedge Fund Activism?. Financial Management, Forthcoming.

67 Pages Posted: 25 Jun 2019 Last revised: 16 Jan 2024

See all articles by Ivan E. Brick

Ivan E. Brick

affiliation not provided to SSRN

Yuzi Chen

Central University of Finance and Economics (CUFE) - School of Finance

Jun-Koo Kang

Nanyang Business School, Nanyang Technological University

Jin-Mo Kim

Rutgers, The State University of New Jersey - Rutgers Business School at Newark & New Brunswick

Date Written: November 14, 2021

Abstract

We study whether fund managers’ industry experience is an important source of value creation in hedge fund activism. We find that the targets of industry-expert fund managers realize higher activism announcement returns and better operating performance, particularly when fund managers’ industry expertise is more valuable for targets. These targets also engage in more focused acquisition and divestiture activities in industries where fund managers have experience, allocate more employees to these industries, and cut investments more in the post-acquisition period. The superior performance of targets of industry-expert fund managers is robust to controlling for the endogeneity concern and the attrition bias.

Keywords: Hedge fund activism, Hedge fund manager, Industry experience, Acquisition, Target, Announcement return, Operating performance

JEL Classification: G14, G23, G30, G34

Suggested Citation

Brick, Ivan E. and Chen, Yuzi and Kang, Jun-Koo and Kim, Jin-Mo, Does Hedge Fund Managers’ Industry Experience Matter for Hedge Fund Activism? (November 14, 2021). Brick, I., Chen, Y., Kang, J., Kim, J., 2024. Does Hedge Fund Managers’ Industry Experience Matter for Hedge Fund Activism?. Financial Management, Forthcoming., Available at SSRN: https://ssrn.com/abstract=3407718 or http://dx.doi.org/10.2139/ssrn.3407718

Ivan E. Brick

affiliation not provided to SSRN

Yuzi Chen (Contact Author)

Central University of Finance and Economics (CUFE) - School of Finance ( email )

Jun-Koo Kang

Nanyang Business School, Nanyang Technological University ( email )

Nanyang Avenue, Block S3-01b-54
Singapore, 639798
Singapore
(+65) 6790-5662 (Phone)
(+65) 6791-3697 (Fax)

HOME PAGE: http://www.nbs.ntu.edu.sg/nbs_corporate/divisions/bnf/index.asp

Jin-Mo Kim

Rutgers, The State University of New Jersey - Rutgers Business School at Newark & New Brunswick ( email )

Janice H. Levin Bldg., Room 121
94 Rockafeller Road
Piscataway, NJ 08854-8054
United States

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