Recently, in the Law, Economics, and Organization Seminar here at the Law School, Robin Greenwood presented his paper, co-authored with Michael Schor, entitled Hedge Fund Investor Activism and Takeovers. Using data derived from 13D filings following stock purchases by shareholder activists, the study examines the effect of activist investors on performance. The abstract of the Article follows:

We examine long-horizon stock returns around investor activism in a comprehensive sample of 13D filings by portfolio investors between 1993 and 2006. Announcement returns and long-term abnormal returns surrounding investor activism are high for the subset of targets that are acquired ex-post, but not detectably different from zero for firms that remain independent a year after the initial filing. Firms that are targeted by activists are more likely to get acquired than those in a control sample. The results suggest that hedge funds’ short investment horizons make them better suited to identifying undervalued targets and prompting a takeover than at fixing corporate strategy or tackling long-term corporate governance issues.

The full Article is available for download here.