By April Klein and Emanuel Zur*
Abstract
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.
*Both authors are from the Stern School of Business, New York University. An earlier version of this paper was circulated under the title "Hedge Fund Activism."
This paper is forthcoming in the Journal of Finance. A full list of other Forthcoming Papers is also available.
Developed in collaboration with the Financial Industry Regulatory Authority (FINRA) and having the strong support of the investment banking community, the MSc Capital Markets, Regulation and Compliance covers a wide range of UK, European and international issues; it focuses on building expertise in the regulation and compliance of the capital markets through dedicated practical courses in both those subjects and the economic functioning of markets and instruments, market mechanics and dealing knowledge. With the detailed practical and theoretical knowledge acquired of both the operation of the markets and institutions within them and their regulation and compliance, students will be ideally prepared for a career within the UK, European and international investment banks, broker-dealers, asset managers, other financial institutions and regulatory organisations. The degree is ideal for recent university graduates from a wide range of disciplines and those people working in the industry who would like to specialise in this fast expanding area and for market professionals seeking to enhance their knowledge and skills in regulation and compliance. The regulation and compliance courses can be combined with quantitative courses or with non-quantitative courses, making the degree suitable for all of law, economics, accountancy and other graduates.