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Hedge fund activism, voice, and value creation

Author

Listed:
  • Karpouzis, Efstathios
  • Bouras, Chris
  • Kanas, Angelos

Abstract

We construct a novel hand-collected large data set of 205 U.S. hedge funds and 1031 activist events over the period 2005-2013, which records both the Schedule 13D filing date and the voicing date, and explore the role of voicing in value creation. We employ alternative inferential statistical approaches, including parametric, non-parametric, and heteroscedasticity-robust tests along with bootstrapping. We reveal that the voice date is important in creating short-term firm value, and provide strong evidence that voicing is associated with positive abnormal returns. These abnormal returns are approximately 1.11%, and are higher than the abnormal returns around the Schedule13D date by approximately 64%. There is also evidence of positive voice abnormal returns for voicing events which lead Schedule 13D events. The results are robust to models of abnormal returns allowing for leverage effects, and to alternative inferential statistical procedures. These findings suggest that voicing leads to information revelation, with implications for U.S. stock market arbitrage and the regulation for hedge fund activism information disclosure.

Suggested Citation

  • Karpouzis, Efstathios & Bouras, Chris & Kanas, Angelos, 2019. "Hedge fund activism, voice, and value creation," MPRA Paper 92576, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:92576
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    File URL: https://mpra.ub.uni-muenchen.de/92576/1/MPRA_paper_92576.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    We construct a novel hand-collected large data set of 205 U.S. hedge funds and 1031 activist events over the period 2005-2013; which records both the Schedule 13D filing date and the voicing date; and explore the role of voicing in value creation. We employ alternative inferential statistical approaches; including parametric; non-parametric; and heteroscedasticity-robust tests along with bootstrapping. We reveal that the voice date is important in creating short-term firm value; and provide strong evidence that voicing is associated with positive abnormal returns. These abnormal returns are approximately 1.11%; and are higher than the abnormal returns around the Schedule13D date by approximately 64%. There is also evidence of positive voice abnormal returns for voicing events which lead Schedule 13D events. The results are robust to models of abnormal returns allowing for leverage effects; and to alternative inferential statistical procedures. These findings suggest that voicing leads to information revelation; with implications for U.S. stock market arbitrage and the regulation for hedge fund activism information disclosure.;
    All these keywords.

    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
    • G3 - Financial Economics - - Corporate Finance and Governance

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