Hedge fund investor activism and takeovers
By: Robin Greenwood, Michael Schor
Contributors: Schor, Michael; Harvard Business School. Division of Research
Series: Working paper / Division of Research, Harvard Business School -- 08-004; Working paper (Harvard Business School. Division of Research) -- 08-004
Publisher: Division of Research, Harvard Business School
Published: 2007
Place of publication: Boston]
Language: eng
Number of pages: 50
Description: 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.
Notes: "July 2007"--Publisher's web site.

Includes bibliographical references.