Foundations and Trends® in Finance > Vol 4 > Issue 3

Hedge Fund Activism: A Review

Alon Brav, Duke University and NBER, USA, brav@duke.edu Wei Jiang, Columbia University, USA, wj2006@columbia.edu Hyunseob Kim, Duke University, USA, hyunseob.kim@duke.edu
 
Suggested Citation
Alon Brav, Wei Jiang and Hyunseob Kim (2010), "Hedge Fund Activism: A Review", Foundations and TrendsĀ® in Finance: Vol. 4: No. 3, pp 185-246. http://dx.doi.org/10.1561/0500000026

Published: 25 Mar 2010
© 2010 A. Brav, W. Jiang and H. Kim
 
Subjects
Derivatives
 
Keywords
FinanceCorporate governance
 

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In this article:
1 Introduction
2 Major Work on Hedge Fund Activism
3 Data on Hedge Fund Activism
4 Characteristics of Hedge Fund Activism Events
5 Characteristics of Target Companies
6 Does Hedge Fund Activism Create Value for Shareholders?
7 Returns to Hedge Fund Activism
8 Conclusion
Acknowledgments
Reference

Abstract

This monograph reviews shareholder activism by hedge funds. We first describe the nature and characteristics of hedge fund activism, including the objectives, tactics, and choices of target companies. We then analyze possible value creation brought about by activist hedge funds, both for shareholders in the target companies and for investors in the hedge funds. The evidence generally supports the view that hedge fund activism creates value for shareholders by effectively influencing the governance, capital structure decisions, and operating performance of target firms.

DOI:10.1561/0500000026
ISBN: 978-1-60198-338-1
72 pp. $60.00
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ISBN: 978-1-60198-339-8
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Table of contents:
Introduction
1. Major Work on Hedge Fund Activism
2. Data on Hedge Fund Activism
3. Characteristics of Hedge Fund Activism Events
4. Characteristics of Target Companies
5. Does Hedge Fund Activism Create Value for Shareholders?
6. Returns to Hedge Fund Activism
7. Conclusion
References

Hedge Fund Activism

Hedge Fund Activism surveys the academic literature on hedge fund activism focusing on two main questions: What is the nature of activist hedge funds' intervention in target firms? Does hedge fund activism create value for shareholders in the target firms and investors in the hedge funds? Hedge Fund Activism begins with a brief outline of the research literature and describes datasets on hedge fund activism. It examines the goals and tactics employed by hedge fund activists and analyzes the characteristics of firms that activist hedge funds target. The authors address the fundamental question of whether hedge fund activism creates value for shareholders by examining short- and long-run stock returns and changes in operating performance of target firms. The evidence in the literature indicates that hedge fund activism is successful in achieving the goals of creating value for shareholders of the target companies. Finally, the authors examine returns to investors in activist hedge funds and conclude with ideas for future research.

 
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