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How does hedge fund activism reshape corporate innovation?

Publication ,  Journal Article
Brav, A; Jiang, W; Ma, S; Tian, X
Published in: Journal of Financial Economics
November 1, 2018

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.

Duke Scholars

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Published In

Journal of Financial Economics

DOI

ISSN

0304-405X

Publication Date

November 1, 2018

Volume

130

Issue

2

Start / End Page

237 / 264

Related Subject Headings

  • Finance
  • 3801 Applied economics
  • 3502 Banking, finance and investment
  • 1606 Political Science
  • 1502 Banking, Finance and Investment
  • 1402 Applied Economics
 

Citation

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Brav, A., Jiang, W., Ma, S., & Tian, X. (2018). How does hedge fund activism reshape corporate innovation? Journal of Financial Economics, 130(2), 237–264. https://doi.org/10.1016/j.jfineco.2018.06.012
Brav, A., W. Jiang, S. Ma, and X. Tian. “How does hedge fund activism reshape corporate innovation?Journal of Financial Economics 130, no. 2 (November 1, 2018): 237–64. https://doi.org/10.1016/j.jfineco.2018.06.012.
Brav A, Jiang W, Ma S, Tian X. How does hedge fund activism reshape corporate innovation? Journal of Financial Economics. 2018 Nov 1;130(2):237–64.
Brav, A., et al. “How does hedge fund activism reshape corporate innovation?Journal of Financial Economics, vol. 130, no. 2, Nov. 2018, pp. 237–64. Scopus, doi:10.1016/j.jfineco.2018.06.012.
Brav A, Jiang W, Ma S, Tian X. How does hedge fund activism reshape corporate innovation? Journal of Financial Economics. 2018 Nov 1;130(2):237–264.
Journal cover image

Published In

Journal of Financial Economics

DOI

ISSN

0304-405X

Publication Date

November 1, 2018

Volume

130

Issue

2

Start / End Page

237 / 264

Related Subject Headings

  • Finance
  • 3801 Applied economics
  • 3502 Banking, finance and investment
  • 1606 Political Science
  • 1502 Banking, Finance and Investment
  • 1402 Applied Economics