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Returns to Hedge Fund Activism: An International Study

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  • Marco Becht
  • Julian Franks
  • Jeremy Grant
  • Hannes F. Wagner

Abstract

This paper provides evidence on the incidence, characteristics, and performance of activist engagements across countries. We find that the incidence of activism is greatest with high institutional ownership, particularly for U.S. institutions. We use a sample of 1,740 activist engagements across 23 countries and find that almost one-quarter of engagements are by multi-activists engaging the same target. These engagements perform strikingly better than single activist engagements. Engagement outcomes, such as board changes and takeovers, vary across countries and significantly contribute to the returns to activism. Japan is an exception, with high initial expectations and low outcomes.Received March 3, 2015; editorial decision December 21, 2016 by Editor Andrew Karolyi.

Suggested Citation

  • Marco Becht & Julian Franks & Jeremy Grant & Hannes F. Wagner, 2017. "Returns to Hedge Fund Activism: An International Study," Review of Financial Studies, Society for Financial Studies, vol. 30(9), pages 2933-2971.
  • Handle: RePEc:oup:rfinst:v:30:y:2017:i:9:p:2933-2971.
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    Cited by:

    1. Mike Burkart & Amil Dasgupta, 2014. "Activist Funds, Leverage, and Procyclicality," FMG Discussion Papers dp733, Financial Markets Group.
    2. Atanas Mihov, 2016. "Predisclosure Accumulations by Activist Investors and Price Impact of Trading," Review of Finance, European Finance Association, vol. 20(1), pages 231-263.
    3. Julian FRANKS & Colin MAYER & MIYAJIMA Hideaki & OGAWA Ryo, 2018. "Stock Repurchases and Corporate Control: Evidence from Japan," Discussion papers 18074, Research Institute of Economy, Trade and Industry (RIETI).
    4. Hideaki Miyajima & Ryo Ogawa & Takuji Saito, 2016. "Changes in the Corporate Governance System and Presidential Turnover," Working Papers halshs-01680409, HAL.
    5. Lucian A. Bebchuk & Alon Brav & Wei Jiang, 2015. "The Long-Term Effects of Hedge Fund Activism," NBER Working Papers 21227, National Bureau of Economic Research, Inc.
    6. MIYAJIMA Hideaki & OGAWA Ryo, 2016. "Convergence or Emerging Diversity? Understanding the impact of foreign investors on corporate governance in Japan," Discussion papers 16053, Research Institute of Economy, Trade and Industry (RIETI).
    7. Burkart, Mike & Lee, Samuel, 2018. "Activism and Takeovers," CEPR Discussion Papers 12616, C.E.P.R. Discussion Papers.
    8. repec:kob:tjrevi:dec2018:v:8:p:1-22 is not listed on IDEAS
    9. Corum, Adrian Aycan & Levit, Doron, 2019. "Corporate control activism," Journal of Financial Economics, Elsevier, vol. 133(1), pages 1-17.
    10. Mike Burkart & Samuel Lee, 2015. "Signalling to Dispersed Shareholders and Corporate Control," Review of Economic Studies, Oxford University Press, vol. 82(3), pages 922-962.
    11. Nickolay Gantchev & Oleg R Gredil & Chotibhak Jotikasthira, 2019. "Governance under the Gun: Spillover Effects of Hedge Fund Activism," Review of Finance, European Finance Association, vol. 23(6), pages 1031-1068.
    12. Hideaki Miyajima & Takaaki Hoda & Ryo Ogawa, 2016. "Does Ownership Really Matter? : The Role of Foreign Investors in Corporate Governance in Japan," Working Papers halshs-01643915, HAL.
    13. Karpouzis, Efstathios & Bouras, Chris & Kanas, Angelos, 2019. "Hedge fund activism, voice, and value creation," MPRA Paper 92576, University Library of Munich, Germany.
    14. Ordonez-Calafi, Guillem & Bernhardt, Dan, 2019. "Blockholder Disclosure Thresholds and Hedge Fund Activism," The Warwick Economics Research Paper Series (TWERPS) 1203, University of Warwick, Department of Economics.
    15. MIYAJIMA Hideaki & HODA Takaaki & OGAWA Ryo, 2015. "Does Ownership Really Matter? The role of foreign investors in corporate governance in Japan," Discussion papers 15078, Research Institute of Economy, Trade and Industry (RIETI).
    16. Barbara G. Katz & Joel Owen, 2014. "An Evaluation of Shareholder Activism," Working Papers 14-09, New York University, Leonard N. Stern School of Business, Department of Economics.
    17. Denes, Matthew R. & Karpoff, Jonathan M. & McWilliams, Victoria B., 2017. "Thirty years of shareholder activism: A survey of empirical research," Journal of Corporate Finance, Elsevier, vol. 44(C), pages 405-424.
    18. Alon Brav & Wei Jiang & Song Ma & Xuan Tian, 2016. "How Does Hedge Fund Activism Reshape Corporate Innovation?," NBER Working Papers 22273, National Bureau of Economic Research, Inc.
    19. Barkó, Tamás & Cremers, M. & Renneboog, Luc, 2017. "Shareholder Engagement on Environmental, Social, and Governance Performance," Discussion Paper 2017-040, Tilburg University, Center for Economic Research.
    20. John Buchanan & Dominic H. Chai & Simon Deakin, 2018. "Unexpected Corporate Outcomes from Hedge Find Activism in Japan," Working Papers wp494, Centre for Business Research, University of Cambridge.
    21. Cvijanovic, Dragana & Dasgupta, Amil & Zachariadis, Konstantinos, 2019. "The Wall Street Stampede: Exit as Governance with Interacting Blockholders," CEPR Discussion Papers 13870, C.E.P.R. Discussion Papers.
    22. Edmans, Alex & Holderness, Clifford, 2016. "Blockholders: A Survey of Theory and Evidence," CEPR Discussion Papers 11442, C.E.P.R. Discussion Papers.
    23. Brav, Alon & Jiang, Wei & Ma, Song & Tian, Xuan, 2018. "How does hedge fund activism reshape corporate innovation?," Journal of Financial Economics, Elsevier, vol. 130(2), pages 237-264.

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    JEL classification:

    • 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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