Hedge Fund Activism and Debt Maturity Structure

70 Pages Posted: 10 Aug 2019 Last revised: 9 Aug 2021

See all articles by Amanjot Singh

Amanjot Singh

King's University College at Western University

Saikat S. Deb

Deakin Business School, Deakin University

Harminder Singh

Deakin University - School of Accounting, Economics and Finance

Date Written: June 28, 2019

Abstract

We provide evidence that activist hedge funds significantly influence target firms’ debt choices. After hedge fund activism (HFA), the proportion of long-term debt significantly increases in US firms. Target firms’ debt maturity increases with post-HFA governance reforms; moreover, activists’ potential rent-seeking behaviour does not significantly affect targets’ debt maturity. Post HFA, target firms issue more bonds than loans; such preference for bonds explains the increase in targets’ debt maturity. However, we do not find that supply-side constraints influence this choice. Our findings indicate that target firms substitute their creditor-driven governance with a governance mechanism influenced by activist hedge funds.

Keywords: Debt maturity structure, Hedge fund activism, 13D filings

JEL Classification: G30, G32

Suggested Citation

Singh, Amanjot and Deb, Saikat Sovan and Singh, Harminder, Hedge Fund Activism and Debt Maturity Structure (June 28, 2019). Available at SSRN: https://ssrn.com/abstract=3430923 or http://dx.doi.org/10.2139/ssrn.3430923

Amanjot Singh

King's University College at Western University ( email )

266 Epworth Ave
London, N6A2M3
Canada
N6A2M3 (Fax)

Saikat Sovan Deb (Contact Author)

Deakin Business School, Deakin University ( email )

221 Burwood Highway Victoria
Burwood, Victoria 3125
Australia
0061 3 92517745 (Phone)
+61 3 9244 6283 (Fax)

HOME PAGE: http://https://www.deakin.edu.au/about-deakin/people/saikat-sovan-deb

Harminder Singh

Deakin University - School of Accounting, Economics and Finance ( email )

221 Burwood Highway
Burwood, Victoria 3215
Australia

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