Premium
The Returns to Hedge Fund Activism in Germany
Author(s) -
Bessler Wolfgang,
Drobetz Wolfgang,
Holler Julian
Publication year - 2015
Publication title -
european financial management
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.311
H-Index - 64
eISSN - 1468-036X
pISSN - 1354-7798
DOI - 10.1111/eufm.12004
Subject(s) - hedge fund , alternative beta , shareholder , business , monetary economics , global assets under management , german , fund of funds , control (management) , open end fund , hedge accounting , financial system , corporate governance , economics , institutional investor , finance , market liquidity , history , management , archaeology
Abstract Recent regulatory changes in the German financial system shifted corporate control activities from universal banks to other capital market participants. Particularly hedge funds took advantage of the resulting control vacuum by acquiring stakes in weakly governed and less profitable firms. We document that, on average, hedge funds increased shareholder value in the short‐ and long‐run. However, more aggressive hedge funds generated only initially higher returns and their outperformance quickly reversed, whereas non‐aggressive hedge funds ultimately outperformed their aggressive peers. These findings suggest that aggressive hedge funds attempt to expropriate the target firm's shareholders by exiting at temporarily increased share prices .