Returns to Shareholder Activism: Evidence from a Clinical Study of the Hermes UK Focus Fund
In: Corporate Governance
AbstractThis article reports a unique analysis of private engagements by an activist fund.ï¿½ It is based on data made available to us by Hermes, the fund manager owned by the British Telecom Pension Scheme (BTPS), on engagements with management in companies targeted by its U.K. Focus Fund (HUKFF).ï¿½ 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.ï¿½ The fund substantially outperforms benchmarks and we estimate that abnormal returns are largely associated with engagements rather than stock picking.ï¿½ We categorize the engagements and measure their impact on the returns of target companies and the fund.ï¿½ We find that Hermes frequently seeks and achieves significant changes in the company's strategy including refocusing on the core business and returning cash to shareholders, and changes in the executive management including the replacement of the CEO or chairmen.
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Other versions of this item:
- Marco Becht & Julian Franks & Colin Mayer & Stefano Rossi, 2009. "Returns to Shareholder Activism: Evidence from a Clinical Study of the Hermes UK Focus Fund," Review of Financial Studies, Society for Financial Studies, Society for Financial Studies, vol. 22(8), pages 3093-3129, August.
- Marco Becht & Julian Franks & Colin Mayer & Stefano Rossi, 2010. "Returns to Shareholder Activism: Evidence from a Clinical Study of the Hermes UK Focus Fund," Review of Financial Studies, Society for Financial Studies, Society for Financial Studies, vol. 23(3), pages 3093-3129, March.
- Colin Mayer & Marco Becht, 2008. "Returns to Shareholder ActivismÃ‚ Evidence from a Clinical Study of the Hermes U.K. Focus Fund," Economics Series Working Papers 2008fe07, University of Oxford, Department of Economics.
- Marco Becht & Julian R. Franks & Colin Mayer & Stefano Rossi, 2008. "Return to shareholder activism: evidence from a clinical study of the Hermes U.K. Focus fund," ULB Institutional Repository 2013/13304, ULB -- Universite Libre de Bruxelles.
- G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
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