Power Tussle: Hedge Fund Activists and Short Sellers

61 Pages Posted: 6 Apr 2021 Last revised: 11 Aug 2023

See all articles by Tao Li

Tao Li

University of Florida - Department of Finance, Insurance and Real Estate

Pedro Saffi

University of Cambridge - Judge Business School

Daheng Yang

Columbia University - Columbia Business School

Date Written: April 6, 2021

Abstract

We study events in which activist hedge funds and short sellers target the same stock using unique European data on activism and mandatory disclosures of large short positions. The presence of large short sellers is associated with a 22.6% increase in the probability of becoming an activist target. Such presence also increases campaigns' success probability and profitability. Importantly, activists employ fewer hostile tactics, launch shorter campaigns, and achieve better post-activism corporate outcomes, consistent with firms becoming more receptive to activists' demands after facing pressure from short sellers. Hedge fund activism is also associated with a reduction in disclosed short positions.

Keywords: Hedge fund activism, short selling, short position disclosure, equity lending

JEL Classification: G12, G14, G15, G2, G34

Suggested Citation

Li, Tao and Saffi, Pedro A. C. and Yang, Daheng, Power Tussle: Hedge Fund Activists and Short Sellers (April 6, 2021). Columbia Business School Research Paper Forthcoming, Available at SSRN: https://ssrn.com/abstract=3820253 or http://dx.doi.org/10.2139/ssrn.3820253

Tao Li (Contact Author)

University of Florida - Department of Finance, Insurance and Real Estate ( email )

Warrington College of Business
Gainesville, FL 32611
United States

HOME PAGE: http://warrington.ufl.edu/contact/profile.asp?WEBID=7628

Pedro A. C. Saffi

University of Cambridge - Judge Business School ( email )

Trumpington Street
Cambridge, CB2 1AG
United Kingdom

HOME PAGE: http://www.pedrosaffi.com

Daheng Yang

Columbia University - Columbia Business School ( email )

3022 Broadway
New York, NY 10027
United States

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