Publications
Publications
- 2007
- HBS Working Paper Series
Hedge Fund Investor Activism and Takeovers
By: Robin Greenwood and Michael Schor
Abstract
We examine long-horizon stock returns around hedge fund activism in a comprehensive sample of 13D filings by portfolio investors between 1993 and 2006. Abnormal returns surrounding investor activism are high for the subset of targets that are acquired ex-post, but not detectably different from zero for targets that remain independent a year after the initial activist request. Announcement returns show a similar pattern. Firms that are targeted by activists are more likely to get acquired than those in a control sample. We argue that the combination of hedge funds' short investment horizons and their large positions in target firms makes M&A the only attractive exit option. The results also suggest that hedge funds may be better suited to identifying undervalued targets and prompting a takeover, than at engaging in long-term corporate governance or operating issues.
Keywords
Mergers and Acquisitions; Private Equity; Investment Return; Investment Activism; Investment Portfolio; Corporate Governance
Citation
Greenwood, Robin, and Michael Schor. "Hedge Fund Investor Activism and Takeovers." Harvard Business School Working Paper, No. 08-004, July 2007.