Investors’ activism and the gains from takeover deals

Hedge Fund Activism vs. Hostile Takeover Bids⇤

We compare hedge fund activism and hostile tender offers in a unified framework where any investor who acquires an equity stake to improve firm value faces a dual free-rider problem: Neither do dispersed shareholders sell their shares unless the price fully reflects the anticipated value improvement nor do those who retain their shares participate in the costs. We show that activism and tender ...

Entrepreneurial Shareholder Activism: Hedge Funds and Other Private Investors

We examine recent confrontational activism campaigns by hedge funds and other private investors. The main parallels between the groups are a significantly positive market reaction for the target firm around the initial Schedule 13D filing date, significantly positive returns over the subsequent year, and the activist’s high success rate in achieving its original objective. Further, both activis...

Investors’ Perceptions of Activism via Voting: Evidence from Contentious Shareholder Meetings

We define annual shareholder meetings as contentious if a significant fraction of shareholders are expected to vote against management’s recommendation on one or more of the items on the ballot, a signal that shareholders are increasing their monitoring activity. Using a sample of almost 28,000 meetings between 2003 and 2012, we examine stock returns over the period between the proxy filing and...

The Choice of Ipo versus Takeover: Private Investors and Empirical Evidence*

We study the effect of private investor contractual governance on the likelihood of an entrepreneurial firm going public versus being acquired. On one hand, we may expect that the use of strong investor control contracts improves entrepreneurial firm governance and increases the probability of going public. On the other hand, we may expect that founding entrepreneurs generally prefer to maintai...

Are Investors’ Gains and Losses from Securities Fraud Equal Over Time? Theory and Evidence