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Value Creation Or Destruction Hedge Funds As Shareholder Activists
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Book Synopsis Value Creation or Destruction? Hedge Funds as Shareholder Activists by : Christopher P. Clifford
Download or read book Value Creation or Destruction? Hedge Funds as Shareholder Activists written by Christopher P. Clifford and published by . This book was released on 2012 with total page 42 pages. Available in PDF, EPUB and Kindle. Book excerpt: I examine the effects of shareholder activism by hedge funds from 1998-2005. When hedge funds accumulate more than 5% of a firm, they must file a regulatory disclosure with the SEC that indicates whether their investment intentions are active or passive. Firms which are targeted by hedge funds for active purposes earn larger excess stock returns and improvements in operating performance (ROA) than a control group of firms that are targeted by the same hedge funds for passive purposes. These operational improvements appear to be driven by the divestiture of underperforming assets. I examine the organizational structure of the hedge funds and find that funds engaging in activism are more likely to have longer lock-ups and withdrawal notification periods than their non-activist peers; indicating that liquidity concerns may be an important determinant in the efficacy of activism. Finally, I document that the returns to the hedge fund are larger for their active blocks than their passive blocks, indicating that activist shareholders may use higher returns to mitigate the cost of their monitoring effort.
Download or read book Hedge Fund Activism written by Alon Brav and published by Now Publishers Inc. This book was released on 2010 with total page 76 pages. Available in PDF, EPUB and Kindle. Book excerpt: Hedge Fund Activism begins with a brief outline of the research literature and describes datasets on hedge fund activism.
Book Synopsis Hedge Funds versus Private Equity Funds as Shareholder Activists - Differences in Value Creation by : Mark Mietzner
Download or read book Hedge Funds versus Private Equity Funds as Shareholder Activists - Differences in Value Creation written by Mark Mietzner and published by . This book was released on 2008 with total page 47 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper analyzes market reactions triggered by announcements that hedge funds and private equity investors have purchased large blocks of voting rights. We argue that changes in shareholder wealth are related to the opportunity, possibility, and motivation of being an active blockholder who successfully reduces agency problems. We find positive abnormal returns following an announcement that an active shareholder has acquired at least 5% of a company's voting rights. Proxy variables for agency costs explain the market reaction only for investments of private equity funds. Considering the long-term stock price performance, we observe negative buy-and-hold abnormal returns especially for the hedge fund samples. We argue that this is because of the German corporate governance system, whereby hedge funds must align their interests with advisory board members. Therefore, we believe the distinct negative post-announcement stock performance of hedge fund targets may be a misinterpretation by the capital market of a hedge fund's abilities and motivations. It seems market participants do not believe hedge fund activism creates wealth effects in a manner comparable to private equity engagements.
Book Synopsis Hedge Funds vs. Private Equity Funds as Shareholder Activists - Differences in Value Creation by : Mark Mietzner
Download or read book Hedge Funds vs. Private Equity Funds as Shareholder Activists - Differences in Value Creation written by Mark Mietzner and published by . This book was released on 2007 with total page 49 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper analyzes market reactions triggered by announcements that hedge funds and private equity investors purchase large blocks of voting rights. We argue that changes in share-holder's wealth are related to the opportunity, possibility and motivation of being an active blockholder, who successfully reduce agency problems. The investigation is based on a unique data set of German public listed companies and relates their short-term and long-term stock performance to several corporate and market variables. We find positive abnormal returns triggered by an announcement that an active shareholder acquired at least 5% of a company's voting rights. Interestingly, variables proxying for agency costs explain the market reaction for our private equity sample, only. Ownership characteristics provide only poor evidence for explaining the market reaction within our hedge fund sample; although they are important for the private equity sample. Considering the long-term market performance, we observe considerably negative benchmark adjusted buy-and-hold returns for both samples. However, our results indicate a misinterpretation by the capital market regarding a hedge fund's motivations and activities.
Book Synopsis Activist Vs. Passivist Hedge Funds by : Ivan Kühne
Download or read book Activist Vs. Passivist Hedge Funds written by Ivan Kühne and published by Haupt Verlag AG. This book was released on 2011 with total page 350 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Institutional Investor Activism by : William Bratton
Download or read book Institutional Investor Activism written by William Bratton and published by OUP Oxford. This book was released on 2015-08-20 with total page 924 pages. Available in PDF, EPUB and Kindle. Book excerpt: The past two decades has witnessed unprecedented changes in the corporate governance landscape in Europe, the US and Asia. Across many countries, activist investors have pursued engagements with management of target companies. More recently, the role of the hostile activist shareholder has been taken up by a set of hedge funds. Hedge fund activism is characterized by mergers and corporate restructuring, replacement of management and board members, proxy voting, and lobbying of management. These investors target and research companies, take large positions in `their stock, criticize their business plans and governance practices, and confront their managers, demanding action enhancing shareholder value. This book analyses the impact of activists on the companies that they invest, the effects on shareholders and on activists funds themselves. Chapters examine such topic as investors' strategic approaches, the financial returns they produce, and the regulatory frameworks within which they operate. The chapters also provide historical context, both of activist investment and institutional shareholder passivity. The volume facilitates a comparison between the US and the EU, juxtaposing not only regulatory patterns but investment styles.
Book Synopsis Hedge Funds Versus Private Equity Funds as Shareholder Activists in Germany - Differences in Value Creation by : Denis Schweizer
Download or read book Hedge Funds Versus Private Equity Funds as Shareholder Activists in Germany - Differences in Value Creation written by Denis Schweizer and published by . This book was released on 2013 with total page 39 pages. Available in PDF, EPUB and Kindle. Book excerpt: We investigate the valuation effects of German firms targeted by hedge funds and by private equity investors. We argue that both types of investors differ from other blockholders by their strong motivation and ability to actively engage and reduce agency costs. Consequently, we find positive abnormal returns following a change in ownership structure. However, these effects differ markedly between both investors, as proxy variables for agency costs only explain the market reaction for our private equity subsample. We conclude that private equity funds seem to be more successful at creating shareholder value, which could be due to their longer-term perspective and a higher adaptability to the surrounding corporate governance.
Book Synopsis Recent Advances in Research on Hedge Fund Activism by : Alon Brav
Download or read book Recent Advances in Research on Hedge Fund Activism written by Alon Brav and published by . This book was released on 2015 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: Hedge fund activism emerged as a major force of corporate governance in the 2000s. By the mid-2000s, there were between 150 and 200 activist hedge funds in action each year, advocating for changes in 200-300 publicly listed companies in the United States. In this article, we review the evolution and major characteristics of hedge fund activism, as well as the short- and long-term impacts of the performance and governance of targeted companies. Though most of the analyses here are based on a comprehensive sample of over 2,000 activism events in the United States from 1994 to 2011, hand-collected by the authors from regulatory filings and news searches, this article covers all major studies on the topic, including those on markets outside of the United States.
Book Synopsis Extreme Value Hedging by : Ronald D. Orol
Download or read book Extreme Value Hedging written by Ronald D. Orol and published by John Wiley & Sons. This book was released on 2008-01-18 with total page 400 pages. Available in PDF, EPUB and Kindle. Book excerpt: Activist hedge fund managers represent a small part of the $1.5 trillion hedge fund industry, but their approach is causing a stir among traditional managers and the investment community because they are shaking up the corporate establishment and making money for their investors. These types of managers are here to stay and Extreme Value Hedging tells the story of their rise to power in the U.S. and how they are spreading their influential gospel around the globe to places like China, Ukraine, South Korea and Sweden. Author Ronald D. Orol has a unique understanding of this world and through this book he shares his unparalleled insights in an easy to comprehend manner. He discusses everything from activist investor efforts to breakup the clubby insider world of corporate boardrooms to their deal-making or breaking pressure tactics and courtroom battles. Orol skillfully makes his case for each subject by offering revelations and examples from insiders like Ralph Whitworth, (Relational Investors), Guy Wyser-Pratte, (Wyser-Pratte Management), Mark Schwarz, (Newcastle Capital Group LLC), Robert Chapman (Chapman Capital), Phillip Goldstein (Opportunity Partners), Jeffrey Ubben (ValueAct Capital), Jeffrey M. Solomon (Ramius Capital Group LLC), Michael Van Biema (Van Biema Value Partners), Eric Rosenfeld (Crescendo Partners), Lars Förberg (Cevian Capital) and Emanuel Pearlman (Liberation Investment Group), among many, many others.
Book Synopsis Shareholder Activism and Implications for Corporate Governance by : Karen Brenner
Download or read book Shareholder Activism and Implications for Corporate Governance written by Karen Brenner and published by . This book was released on 2008 with total page 18 pages. Available in PDF, EPUB and Kindle. Book excerpt: Shareholder activists have used multiple approaches to pressure corporate boards and managers to enhance firm value. Historically, traditional activists have included individuals, mutual funds, and pension funds, but in recent years hedge funds have come to play an ever increasing role. This paper will review recent academic literature on the topic of shareholder activism and address the different opportunities or constraints associated with each activist group. Additionally, the tactics employed by activist hedge funds and their effectiveness in pursuing value creation strategies and changes in board governance will be reviewed. Looking forward, the paper considers the implications associated with the enormous growth of hedge funds, particularly in light of current market conditions.
Book Synopsis Shareholder Activism by Hedge Funds: Motivations and Market's Perceptions of Hedge Fund Interventions by : Mihaela Butu
Download or read book Shareholder Activism by Hedge Funds: Motivations and Market's Perceptions of Hedge Fund Interventions written by Mihaela Butu and published by Diplomica Verlag. This book was released on 2013 with total page 61 pages. Available in PDF, EPUB and Kindle. Book excerpt: In recent years, hedge funds' successful interventions in some large public companies have revealed their critical role in the corporate governance landscape in the United States and Europe. Due to public opinion, this new form of shareholder activism is accompanied by much polemic. This study examines the nature of hedge fund activism, the types of them, and the market’s perception of interventions in the United States. Starting with a distinction between shareholder activism by traditional institutions, and activism performed by hedge funds, the study elucidates why the latter may be more effective in monitoring management, and reduce agency costs. Analysing the Schedules 13D filed with the U.S. Securities and Exchange Commission, the study provides a classification of activists’ demands into ten distinct categories, arguing that hostile forms of activism are not central for hedge funds, and some more aggressive types of activism are possibly used as a negotiating tool to achieve the activist’s agenda. Using the event study methodology, the author estimates the stock returns around the announcement date. For a better understanding of hedge fund activism, and their demands on target companies, the reader will find two original Schedule 13D filings accompanied by letters to the management. Finally, the paper concludes on a view of the subject through the prism of the 2007/ 2008 financial crisis, outlining some trends in the aftermath of the financial market turmoil.
Book Synopsis Shareholder Empowerment by : Maria Goranova
Download or read book Shareholder Empowerment written by Maria Goranova and published by Springer. This book was released on 2015-12-27 with total page 519 pages. Available in PDF, EPUB and Kindle. Book excerpt: In this volume, leading management experts offer critical insights into the promises and illusions of shareholder empowerment, the discrepancies between theory and practice, and the challenges posed by variations in global corporate governance regimes.
Book Synopsis The Wolf at the Door by : John C. Coffee
Download or read book The Wolf at the Door written by John C. Coffee and published by . This book was released on 2016-02-10 with total page 108 pages. Available in PDF, EPUB and Kindle. Book excerpt: The Wolf at the Door: The Impact of Hedge Fund Activism on Corporate Governance has three basic aims: to understand and explain the factors that have caused an explosion in hedge fund activism; to examine the impact of this activism; and to survey and evaluate possible legal interventions with an emphasis on the least restrictive alternative.
Book Synopsis Influences of Hedge Fund Activism on the Medium Term Target Firm Value by : Nick W.A. Stokman
Download or read book Influences of Hedge Fund Activism on the Medium Term Target Firm Value written by Nick W.A. Stokman and published by . This book was released on 2007 with total page 76 pages. Available in PDF, EPUB and Kindle. Book excerpt: In this study, the 'new' phenomenon of hedge fund activism is examined by testing the effects of 188 hedge fund activism events from Europe and North America. For all events it was measured what the effects were after the initial investment and the first action by the hedge fund, with the goal to research if these effects resulted in a value increase on the target firm value. On a short term period surrounding the initial filing by an activist hedge fund, there were found significant abnormal returns in the range of 9,5% to 12,19%, in both Europe and North America.Also, on a 6-month window significant positive abnormal returns were found, indicating that the involvement of a hedge fund activist created value also on a longer term.Furthermore, in the 20 days surrounding the initial activism, results showed a statistically significant abnormal return of 5,59%. After 6 months, this effect decreased a little and was not significant anymore. This decrease was mainly due to the events in Europe, that were less successful and reported no significant effects on the medium term. In contrast, in North America, on the medium term there were found (though not significant) even larger positive abnormal returns.Overall, the investments of activist hedge funds lead to an increase in shareholder value for the targeted firms. Activist hedge funds can be described as value investors that try to increase shareholder value by certain actions. The presented evidence in this research indicates that they are often successful in this strategy and thus create an increase in firm value on both the short and medium term.
Book Synopsis The Subversion of Shareholder Democracy and the Rise of Hedge-Fund Activism by : Jang-Sup Shin
Download or read book The Subversion of Shareholder Democracy and the Rise of Hedge-Fund Activism written by Jang-Sup Shin and published by . This book was released on 2018 with total page 57 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper explains how hedge-fund activists are exerting power over corporate resource allocation far in excess of the actual voting power of their shareholdings. The power of these “minority-shareholding corporate raiders” derives from misguided regulatory “reforms” carried out in the 1980s and 1990s in the name of “shareholder democracy”. Sanctioned and overseen by the Department of Labor (DOL) and the Securities and Exchange Commission (SEC), these reforms include the introduction of compulsory voting by institutional investors and proxy-voting rule changes that greatly facilitated hedge-fund activists' aggregation of the proxy votes of institutional investors. In addition, the introduction of the 1996 National Securities Markets Improvement Act (NSMIA) that allowed hedge funds to draw funds from institutional investors effectively with no limit also played an important role in the rise of hedge-fund activism. The paper concludes with policy proposals to rebalance value creation and value extraction by rebuilding the engagement and proxy voting system including (1) making it mandatory for shareholders to submit justifications in shareholder proposals on value creation or capital formation of corporations concerned; (2) removing voting as a fiduciary duty of institutional investors; (3) introducing differentiated voting rights that favor long-term shareholders; and (4) making it mandatory for both shareholders and management to reveal to the public what they discussed in engagement sessions.
Book Synopsis The Oxford Handbook of Hedge Funds by : Douglas Cumming
Download or read book The Oxford Handbook of Hedge Funds written by Douglas Cumming and published by Oxford University Press. This book was released on 2021 with total page 577 pages. Available in PDF, EPUB and Kindle. Book excerpt: This handbook provides a comprehensive look at the hedge fund industry from a global perspective.
Book Synopsis Hedge Fund Activism and Financial Performance by : J.B. Heaton
Download or read book Hedge Fund Activism and Financial Performance written by J.B. Heaton and published by . This book was released on 2020 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: Up to the late 1990s, there was little evidence that shareholder activism generated any economically meaningful improvements in share prices or the operating performance of corporations. By the early 2000s, however, a new form of shareholder activism began to emerge: shareholder activism by hedge funds. Hedge fund activism promised to be different and more effective than past efforts. As it turned out, however, the promise of hedge fund activism has been largely, though not entirely, unfulfilled. Hedge fund activists have influenced corporate managers to increase shareholder value, and in that sense they have succeeded where prior activists failed, doing more to compensate for a bridled market for corporate control than previous activism. But the success of hedge fund activists has been narrow; they seem to succeed only when they facilitate the sale of the target firm. The main focus of this chapter is to explore why hedge fund activism has been so limited in its successes. I conclude that there likely is no form of shareholder activism that will add real value for shareholders beyond facilitating the sale of the firm. The problem, in other words, is not with the nature of the activist. The problem is with the nature of corporations themselves and the limits of “outsideness.”
