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Activism mergers

Author

Listed:
  • Boyson, Nicole M.
  • Gantchev, Nickolay
  • Shivdasani, Anil

Abstract

Shareholder value creation from hedge fund activism occurs primarily by influencing takeover outcomes for targeted firms. Controlling for selection decisions, activist interventions substantially increase the probability of a takeover offer. Third-party bids for targets have higher returns, premia, and completion rates, but these patterns reverse when the activist is the bidder. Failed bids for activism targets lead to improvements in operating performance, financial policy, and positive long-term abnormal returns, suggesting that activism enhances value. The positive long-term performance from hedge fund activism arises from monitoring target management during merger and acquisition contests and not from target undervaluation or bidder overpayment.

Suggested Citation

  • Boyson, Nicole M. & Gantchev, Nickolay & Shivdasani, Anil, 2017. "Activism mergers," Journal of Financial Economics, Elsevier, vol. 126(1), pages 54-73.
  • Handle: RePEc:eee:jfinec:v:126:y:2017:i:1:p:54-73
    DOI: 10.1016/j.jfineco.2017.06.008
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    References listed on IDEAS

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    Keywords

    Hedge fund activism; Shareholder activism; Corporate governance; Mergers and acquisitions; Institutional investors;

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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