The Real Effects of Hedge Fund Activism: Productivity, Asset Allocation, and Labor Outcomes

Published

Scholarly Edition

© 2015 The Author 2015. Published by Oxford University Press on behalf of The Society for Financial Studies. All rights reserved. This paper studies the long-Term effect of hedge fund activism on firm productivity using plant-level information from the U.S. Census Bureau. A typical target firm improves production efficiency in the 3 years after intervention, with stronger improvements in business strategy-oriented interventions. Plants sold after intervention improve productivity significantly under new ownership, suggesting that capital redeployment is an important channel for value creation. Employees of target firms experience stagnation in work hours and wages despite an increase in labor productivity. Additional tests refute alternative explanations attributing the improvement to mean reversion, management's voluntary reforms, industry consolidation shocks, or activists' stock-picking abilities.

Full Text

Duke Authors

Cited Authors

  • Brav, A; Jiang, W; Kim, H

Published Date

  • January 1, 2015

Start / End Page

  • 2723 - 2769

Digital Object Identifier (DOI)

  • 10.1093/rfs/hhv037

Citation Source

  • Scopus