How does hedge fund activism reshape corporate innovation?


Journal Article

© 2018 Elsevier B.V. This paper studies how hedge fund activism impacts corporate innovation. Firms targeted by activists improve their innovation efficiency over the five-year period following hedge fund intervention. Despite a tightening in research and development (R&D) expenditures, target firms increase innovation output, as measured by both patent counts and citations, with stronger effects among firms with more diversified innovation portfolios. Reallocation of innovative resources, redeployment of human capital, and change to board-level expertise all contribute to improve target firms’ innovation. Additional tests help isolate the effect of intervention from alternative explanations, including mean reversion, sample attrition, voluntary reforms, or activist stock-picking.

Full Text

Duke Authors

Cited Authors

  • Brav, A; Jiang, W; Ma, S; Tian, X

Published Date

  • November 1, 2018

Published In

Volume / Issue

  • 130 / 2

Start / End Page

  • 237 - 264

International Standard Serial Number (ISSN)

  • 0304-405X

Digital Object Identifier (DOI)

  • 10.1016/j.jfineco.2018.06.012

Citation Source

  • Scopus