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Does familiarity breed activism? Geography and hedge fund activism

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  • Faleye, Olubunmi

Abstract

I study the role of geographical proximity in hedge fund activism and find that activist hedge funds are more likely to target firms located closer to their headquarters. Despite this proximity preference, activism returns are lower for nearer targets. Alternative factors, including lower activism costs, target selection effects, and reduced employee wealth transfers at nearby firms do not explain lower returns to proximate targets. Instead, results are consistent with familiarity bias in hedge fund targeting decisions. Additional tests focusing on small targets, openly confrontational campaigns, and passive investments reinforce this behavioral explanation.

Suggested Citation

  • Faleye, Olubunmi, 2026. "Does familiarity breed activism? Geography and hedge fund activism," Journal of Financial Markets, Elsevier, vol. 77(C).
    • Handle: RePEc:eee:finmar:v:77:y:2026:i:c:s138641812500045x
    DOI: 10.1016/j.finmar.2025.101005
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    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G41 - Financial Economics - - Behavioral Finance - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets

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