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Entrepreneurial Shareholder Activism: Hedge Funds and Other Private Investors
Author(s) -
KLEIN APRIL,
ZUR EMANUEL
Publication year - 2009
Publication title -
the journal of finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 18.151
H-Index - 299
eISSN - 1540-6261
pISSN - 0022-1082
DOI - 10.1111/j.1540-6261.2008.01432.x
Subject(s) - hedge fund , business , alternative beta , proxy (statistics) , shareholder , institutional investor , global assets under management , expropriation , cash flow , monetary economics , finance , financial system , economics , corporate governance , market economy , machine learning , computer science
We examine recent confrontational activism campaigns by hedge funds and other private investors. The main parallels between the groups are a significantly positive market reaction for the target firm around the initial Schedule 13D filing date, significantly positive returns over the subsequent year, and the activist's high success rate in achieving its original objective. Further, both activists frequently gain board representation through real or threatened proxy solicitations. Two major differences are that hedge funds target more profitable firms than other activists, and hedge funds address cash flow agency costs whereas other private investors change the target's investment strategies.