Antecedents of hedge fund activism in French listed target firms

This article seeks to examine the antecedents of hedge fund (HF) activism in the French context, an area that remains underresearched in contexts outside the US. We focus on the following question: What are the antecedents of hedge fund activism in French listed firms? Hedge funds pursuing activist strategies tend to reduce management discretion in order to improve wealth creation in target firms. Since large shareholders can expropriate minority shareholders by neutralizing governance mechanisms which attempt to discipline management, we focus on the relationship between corporate governance and hedge fund activism in French listed target firms. Drawing on a total population of 36 French listed firms from 1998 to 2013, we propose a model based on an integrated approach to take into account the specificity of the French context. We find a significant relationship between the probability that a firm is targeted by a HF and determinants of HF activism, such as voting rights concentration, institutional and employee voting rights, firm size, debt ratio, operating performance, quality of information disclosure, proportion of independent directors and CEO duality.