EconPapers    
Economics at your fingertips  
 

The Long-Term Effects of Hedge Fund Activism

Lucian Bebchuk (), Alon Brav and Wei Jiang

No 21227, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We test the empirical validity of a claim that has been playing a central role in debates on corporate governance—the claim that interventions by activist hedge funds have a negative effect on the long-term shareholder value and corporate performance. We subject this claim to a comprehensive empirical investigation, examining a long five-year window following activist interventions, and we find that the claim is not supported by the data. We find no evidence that activist interventions, including the investment-limiting and adversarial interventions that are most resisted and criticized, are followed by short-term gains in performance that come at the expense of long-term performance. We also find no evidence that the initial positive stock-price spike accompanying activist interventions tends to be followed by negative abnormal returns in the long term; to the contrary, the evidence is consistent with the initial spike reflecting correctly the intervention’s long-term consequences. Similarly, we find no evidence for pump-and-dump patterns in which the exit of an activist is followed by abnormal long-term negative returns. Our findings have significant implications for ongoing policy debates.

JEL-codes: G12 G23 G32 G34 G35 G38 K22 (search for similar items in EconPapers)
Date: 2015-06
New Economics Papers: this item is included in nep-cfn and nep-fmk
Note: AP CF LE
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (31) Track citations by RSS feed

Downloads: (external link)
http://www.nber.org/papers/w21227.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:21227

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w21227

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().

 
Page updated 2021-05-06
Handle: RePEc:nbr:nberwo:21227