Do Activists Align with Larger Mutual Funds?

Abstract

I use supervised machine learning to estimate the preferences of mutual fund families based on their proxy voting choices. I find that hedge fund activist campaigns are more closely aligned with the preferences of mutual fund families that own a larger portion of the target firm. The positive association between larger mutual fund family preference and activist communication increases as activists mature. Campaigns with a higher positive association between larger mutual fund family preference and activist communication enjoy improved shareholder attention, more votes, and a greater likelihood of success. These findings suggest that activism may help push shareholders' implicit agendas.

Keywords: Hedge Fund Activism, Shareholder Preferences, Text Analysis, Machine Learning

JEL Classification: G23, G32, G34