NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

The Real Effects of Hedge Fund Activism: Productivity, Risk, and Product Market Competition

Alon Brav, Wei Jiang, Hyunseob Kim

NBER Working Paper No. 17517
Issued in October 2011
NBER Program(s):   CF

This paper studies the long-term effect of hedge fund activism on the productivity of target firms using plant-level information from the U.S. Census Bureau. A typical target firm improves its production efficiency within two years after activism, and this improvement is concentrated in industries with a high degree of product market competition. By following plants that were sold post-intervention we also find that efficient capital redeployment is an important channel via which activists create value. Furthermore, our analyses demonstrate that measuring performance using the Compustat data is likely to lead to a downward bias because target firms experiencing greater improvement post-intervention are also more likely to disappear from the Compustat database. Finally, consistent with recent work in asset-pricing linking firm investment decisions and expected returns, we show how changes to target firms' productivity are associated with a decline in systemic risk, particularly in competitive industries.

download in pdf format
   (273 K)

email paper

This paper is available as PDF (273 K) or via email.

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w17517

Users who downloaded this paper also downloaded these:
Ang, Gorovyy, and van Inwegen w16801 Hedge Fund Leverage
Lan, Wang, and Yang w16842 The Economics of Hedge Funds: Alpha, Fees, Leverage, and Valuation
Aragon and Strahan w15336 Hedge Funds as Liquidity Providers: Evidence from the Lehman Bankruptcy
Da Rin, Hellmann, and Puri w17523 A survey of venture capital research
Boyson, Stahel, and Stulz w14068 Hedge Fund Contagion and Liquidity
 
Publications
Activities
Meetings
NBER Videos
Data
People
About

Support
National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us