The Review of Corporate Finance Studies Vol. 10 No. 1 2021

Institutional Investors and Hedge Fund Activism

Simi Kedia¹; Laura T. Starks²; Xianjue Wang³

¹ Rutgers Business School, Rutgers University · ² McCombs School of Business, University of Texas at Austin , · ³ School of Accounting, Southwestern University of Finance and Economics

Abstract

Hedge fund activists have ambiguous relationships with the institutional shareholders in their target firms. While some support their activities, others counter their actions. Due to their relatively small holdings in target firms, activists typically need the cooperation of other institutional shareholders that are willing to influence the activists’ campaign success. We find the presence of “activism-friendly” institutions as owners is associated with an increased probability of being a target, higher long-term stock returns, and higher operating performance. Overall, we provide evidence suggesting the composition of a firm’s ownership has significant effects on hedge fund activists’ decisions and outcomes. (JEL: G13, G23, G34) Received March 12, 2020; editorial decision July 13, 2020 by Editor Andrew Ellul.

DOI

10.1093/rcfs/cfaa027

Volume

10

Issue

1

Pages

1-43

Language

en

Sources

bibtex:phds-export.bib openalex crossref

Cite

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