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The Color of Hedge Fund Activism

Author

Listed:
  • Yongqiang Chu

    (Department of Finance and the Childress-Klein Center for Real Estate, Belk College of Business, University of North Carolina at Charlotte, Charlotte, North Carolina 28223)

  • Bo Huang

    (School of Finance and China Financial Policy Center, Renmin University of China, Beijing 100872, China)

  • Chengsi Zhang

    (School of Finance and China Financial Policy Center, Renmin University of China, Beijing 100872, China)

Abstract

The racial disparity in mortgage approval rates decreases by four percentage points as a result of hedge fund activism targeting banks. Target banks experience a higher turnover of mortgage officers and open new bank branches in areas with greater racial disparities in mortgage approval rates. We show that the results are driven by hedge fund activists’ efforts to increase profitability and comply with the community reinvestment act. Our results suggest that hedge funds’ incentives to maximize shareholder value do not necessarily lead to a negative impact on other stakeholders.

Suggested Citation

  • Yongqiang Chu & Bo Huang & Chengsi Zhang, 2025. "The Color of Hedge Fund Activism," Management Science, INFORMS, vol. 71(6), pages 5142-5161, June.
    • Handle: RePEc:inm:ormnsc:v:71:y:2025:i:6:p:5142-5161
    DOI: 10.1287/mnsc.2022.03452
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