Hedge Fund Activism and Corporate Life Stage: Case Studies of High-technology Companies

Sixiao Xu ()
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Sixiao Xu: University of Warwick, 28-34 Corporation Street, Coventry, CV1 1GF, UK.

Journal of Business, 2018, vol. 3, issue 1, 1-12

Abstract: Hedge fund activism refers to hedge funds’ attempt to change how the company is operated. Hedge fund activism can improve the governance of target companies. But it might also be myopic and increase short-term returns by reducing corporate value in the long term. This paper argues that the real effect of hedge fund activism depends on specific characteristics of target companies and examines one of such factors, corporate life stage. By conducting case studies on hedge fund activism at Apple, eBay and HP, it shows that companies at later life stages are less vulnerable to myopic hedge fund activism, have more corporate governance concerns and thus are more likely to benefit from hedge fund activism.

Keywords: Agency Costs; Corporate Life Stage; Hedge Fund Activism; Short-Termism. Classification JEL: G34; K22; O31. (search for similar items in EconPapers)
Date: 2018
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Persistent link: https://EconPapers.repec.org/RePEc:lrc:larjob:v:3:y:2018:i:1:p:1-12

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