Law & Economics Seminar

Hedge fund activism is a topic of increasing importance among scholars and policy-makers. In the post-financial crisis time period, hedge fund activist interventions at target companies have generated extensive discussion and policy debate, but activism in this time period has not yet been studied in a systematic way. This paper examines recent hedge fund activism using a hand-collected data set regarding 1,262 interventions by hedge fund activists from 2008 through 2014. We find that hedge fund activism continues to generate positive announcement–period abnormal stock returns, and that these returns vary significantly based on which hedge funds are involved. In particular, we find that hedge fund activists involved in the largest interventions in terms of aggregate market capitalization generate the largest abnormal returns, whereas hedge fund activists involved in more frequent, but smaller, interventions generate smaller returns. We create a new measure of hedge fund reputation based on these findings.

The paper is available at http://ssrn.com/abstract=2589992.  

Randall S. Thomas is the John S. Beasley II Professor of Law and Business at Vanderbilt Law School, United States. He has earned a reputation of being one of the most productive and thoughtful corporate and securities law scholars in the US. He joined the Vanderbilt law faculty in 2000, having served previously in on the law faculties of the University of Iowa, the University of Michigan, Duke University, Boston University, and the University of Washington. Prior to teaching law, Professor Thomas was in private practice for four years, and clerked for U.S. District Judge Charles Joiner of the Eastern District of Michigan.