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Entrepreneurial Shareholder Activism: Hedge Funds and Other Private Investors

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  • APRIL KLEIN
  • 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.

Suggested Citation

  • April Klein & Emanuel Zur, 2009. "Entrepreneurial Shareholder Activism: Hedge Funds and Other Private Investors," Journal of Finance, American Finance Association, vol. 64(1), pages 187-229, February.
    • Handle: RePEc:bla:jfinan:v:64:y:2009:i:1:p:187-229
    DOI: 10.1111/j.1540-6261.2008.01432.x
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