Long-Term Economic Consequences of Hedge Fund Activist Interventions

Our new academic study examines the long-term effects of interventions by activist hedge funds. Prior studies document positive equal-weighted long-term returns and operating performance improvements following activist interventions, and typically conclude that activism is beneficial to shareholders. We challenge and extend prior literature in two ways. First, we find that equal-weighted long-term returns are driven by the smallest 20 percent of firms with an average market value of $22 million. The largest 80 percent of firms experience insignificant negative long-term returns. On a value-weighted basis, which likely best gauges effects on shareholder wealth and the economy, we find that pre- … Read more