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Governance under the gun : spillover effects of hedge fund activism
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Gantchev, Nickolay, Gredil, Oleg R. and Jotikasthira, Chotibhak (2019) Governance under the gun : spillover effects of hedge fund activism. Review of Finance, 23 (6). pp. 1031-1068. doi:10.1093/rof/rfy035
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Official URL: http://dx.doi.org/10.1093/rof/rfy035
Abstract
Hedge fund activism is associated with improvements in the governance and performance of targeted firms. In this article, we show that these positive effects of activism reach beyond the targets, as nontargeted peers make similar improvements under the threat of activism. Peers with higher threat perception, as measured by director connections to past targets, are more likely to increase leverage and payout, decrease capital expenditures and cash, and improve return on assets and asset turnover. As a result, their valuations improve, and their probability of being targeted declines. Our results are not explained by time-varying industry conditions or competition effects whereby improved targets force their product market rivals to become more competitive.
| Item Type: | Journal Article | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| Subjects: | H Social Sciences > HD Industries. Land use. Labor H Social Sciences > HG Finance |
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| Divisions: | Faculty of Social Sciences > Warwick Business School | ||||||||
| Library of Congress Subject Headings (LCSH): | Hedge funds , Corporate governance, Stockholders , Stockholders' derivative actions | ||||||||
| Journal or Publication Title: | Review of Finance | ||||||||
| Publisher: | Oxford University Press | ||||||||
| ISSN: | 1572-3097 | ||||||||
| Official Date: | October 2019 | ||||||||
| Dates: |
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| Volume: | 23 | ||||||||
| Number: | 6 | ||||||||
| Page Range: | pp. 1031-1068 | ||||||||
| DOI: | 10.1093/rof/rfy035 | ||||||||
| Status: | Peer Reviewed | ||||||||
| Publication Status: | Published | ||||||||
| Publisher Statement: | This is a pre-copyedited, author-produced version of an article accepted for publication in Review of Finance following peer review. The version of record Nickolay Gantchev, Oleg R Gredil, Chotibhak Jotikasthira, Governance under the Gun: Spillover Effects of Hedge Fund Activism, Review of Finance, Volume 23, Issue 6, October 2019, Pages 1031–1068, https://doi.org/10.1093/rof/rfy035 is available online at: https://doi.org/10.1093/rof/rfy035 | ||||||||
| Access rights to Published version: | Restricted or Subscription Access | ||||||||
| Description: | Free access |
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