The Returns to Hedge Fund Activism

Authors

Randall S. Thomas, Vanderbilt University Law School
Alon Brav, Duke Law School
Wei Jiang, Emory University School of Law
Frank Partnoy, Univ. of Calif., Berkeley

Document Type

Article

Publication Title

Financial Analysts Journal

Publication Date

12-2008

ISSN

0015-198X

Page Number

45

Keywords

alternative investments, hedge fund strategies, portfolio management, corporate governance

Disciplines

Commercial Law | Law

Abstract

Hedge fund activism is a new form of investment strategy. Using a large hand-collected dataset from 2001 to 2006, we find that activist hedge funds in the United States propose strategic, operational, and financial remedies and attain success or partial success in two-thirds of the cases. The abnormal stock return upon announcement of activism is approximately 7 percent, with no reversal during the subsequent year. Target firms experience increases in payout and operating performance and higher CEO turnover after activism. We find large positive abnormal return to hedge fund activists, which is higher than the return to other equity-oriented hedge funds.

Recommended Citation

Randall S. Thomas, Alon Brav, Wei Jiang, and Frank Partnoy, The Returns to Hedge Fund Activism, 64 Financial Analysts Journal. 45 (2008)
Available at: https://scholarship.law.vanderbilt.edu/faculty-publications/1315