Document Type
Article
Publication Title
Journal of Corporate Finance
Publication Date
10-2016
ISSN
0929-1199
Page Number
296
Keywords
hedge funds, shareholder activism, proxy fights
Disciplines
Commercial Law | Law
Abstract
Using a large dataset of hand-collected information on activist interventions from 2008 to 2014, we examine why certain hedge funds succeed in the face of competition. We document that the top hedge funds succeed, not merely because of how they select targets, but because they acquire a reputation for what we label “clout and expertise.” These hedge funds do not intervene more frequently; to the contrary, activists with more interventions are associated with lower returns. Instead, top activists have a demonstrated ability to succeed in difficult interventions by targeting large firms, launching successful proxy fights, filing and winning lawsuits, pressuring target boards through the media, overcoming anti-takeover defenses, and replacing board members. These activists' successes appear to result more from board representation, improved performance, and monitoring management than from capital structure or dividend policy changes.
Recommended Citation
Randall S. Thomas, C. N.V. Krishnan, and Frank Partnoy,
The Second Wave of Hedge Fund Activism: The Importance of Reputation, Clout and Expertise, 40 Journal of Corporate Finance. 296
(2016)
Available at: https://scholarship.law.vanderbilt.edu/faculty-publications/1478