Wolves at the Door: A Closer Look at Hedge Fund Activism

Some commentators attribute the success of certain hedge-fund activism events to “wolf pack” activism, the support offered by other investors, many of whom are thought to accumulate stakes in the target firms before the activists’ campaigns are publicly disclosed. In this study, first I confirm that investors other than the lead activist appear to accumulate significant share-holdings before public disclosure of activists’ campaigns, a result consistent with wolf pack activism. Second, I find part of these share accumulations appears to be mustered by the lead activist rather than occurring spontaneously. Finally, the presence of a wolf pack is found to be associated with a greater likelihood that the activist will achieve its stated objectives and higher stock returns over the duration of the campaign