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What Causes Performance Persistence In Hedge Fund Activism?

What Causes Performance Persistence In Hedge Fund Activism?

Nicole M. Boyson

Northeastern University - D’Amore-McKim School of Business

Linlin Ma

Northeastern University

Robert M. Mooradian

Northeastern University, D’Amore-McKim School of Business, Finance Area

April 2, 2015

Northeastern U. D’Amore-McKim School of Business Research Paper No. 2578262


Hedge fund activists exhibit performance persistence in successive target firm 3-day announcement CARs. As activists accumulate experience, they devote more assets to activism, reduce their time between campaigns, and select larger firms in more industries. Further examination suggests that actual improvements in target firms, not activist reputation effects, drive these results. As activists gain experience, they become more aggressive in their stated goals and more frequently attain success in these goals despite increased target firm resistance. Short-term CARs do not reverse, and target firm long-term operating outcomes improve with activist experience.

What Causes Performance Persistence In Hedge Fund Activism? - Introduction

Hedge Funds have received large capital inflows over the last several years, growing to nearly $3 trillion in assets globally by the end of 2014. The number of managers starting new funds has also increased, making the industry more competitive.1 After a strong period of performance in the 1990s and early 2000s, hedge funds as an asset...