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Returns to Shareholder Activism: Evidence from a Clinical Study of the Hermes UK Focus Fund

Marco Becht1; Julian Franks2; Colin Mayer3,4; Stefano Rossi5

1 Université Libre de Bruxelles · 2 London Business School · 3 Center for Economic and Policy Research · 4 University of Oxford · 5 Stockholm School of Economics

Review of Financial Studies 2010 open access

This article reports a unique analysis of private engagements by an activist fund. It is based on data made available to us by Hermes, the fund manager owned by the British Telecom Pension Scheme, on engagements with management in companies targeted by its UK Focus Fund. In contrast with most previous studies of activism, we report that the fund executes shareholder activism predominantly through private interventions that would be unobservable in studies purely relying on public information. The fund substantially outperforms benchmarks and we estimate that abnormal returns are largely associated with engagements rather than stock picking.

DOI
10.1093/rfs/hhn054.ra
Volume
23 (3)
Pages
3093-3129
Language
en
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