Faculty Publications

External Monitoring And Returns To Hedge Fund Activist Campaigns

Document Type

Article

Keywords

analyst coverage, Hedge fund activism, institutional ownership

Journal/Book/Conference Title

Review of Financial Economics

Volume

38

Issue

1

First Page

97

Last Page

140

Abstract

Firms targeted by hedge fund activists experience significantly higher returns when there are fewer external monitors in place at the target firm. Using analyst coverage and institutional ownership as measures of external monitoring presence, we find that low-monitored activist targets experience abnormal returns 17.52% above that of high-monitored targets in the 2-year period following the initial campaign start date. The significant effect of external monitoring remains after controlling for target firm and activist characteristics. We also document improved operating performance and an increased monitoring presence at low-monitored target firms across the same 2-year period, consistent with the observed market performance.

Department

Department of Finance

Original Publication Date

1-1-2020

DOI of published version

10.1002/rfe.1071

Repository

UNI ScholarWorks, Rod Library, University of Northern Iowa

Language

en

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