TY  - JOUR
AU  - Brav, Alon
AU  - Jiang, Wei
AU  - Ma, Song
AU  - Tian, Xuan
TI  - How Does Hedge Fund Activism Reshape Corporate Innovation?
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 22273
PY  - 2016
Y2  - May 2016
DO  - 10.3386/w22273
UR  - http://www.nber.org/papers/w22273
L1  - http://www.nber.org/papers/w22273.pdf
N1  - Author contact info:
Alon Brav
Fuqua School of Business
Duke University
One Towerview Drive
Durham, NC 27708
Tel: 919/660-2908
Fax: 919/684-2818
E-Mail: brav@duke.edu

Wei Jiang
Graduate School of Business
Columbia University
3022 Broadway, Uris Hall 803
New York, NY 10027
Tel: 212/854-9002
E-Mail: wj2006@columbia.edu

Song Ma
Yale School of Management
165 Whitney Avenue
New Haven, CT 06511
Tel: (203) 436-4687
E-Mail: song.ma@yale.edu

Xuan Tian
PBC School of Finance
Tsinghua University
Beijing, China
Tel: 812-8553420
Fax: 812-8555875
E-Mail: tianx@pbcsf.tsinghua.edu.cn
AB  - This paper studies how hedge fund activism reshapes corporate innovation. Firms targeted by hedge fund activists experience an improvement in innovation efficiency during the five-year period following the intervention. Despite a tightening in R&D expenditures, target firms experience increases in innovation output, measured by both patent counts and citations, with stronger effects seen among firms with more diversified innovation portfolios. We also find that the reallocation of innovative resources and the redeployment of human capital contribute to the refocusing of the scope of innovation. Finally, additional tests refute alternative explanations attributing the improvement to mean reversion, sample attrition, management’s voluntary reforms, or activists’ stock-picking abilities.
ER  -