Sunday, February 18, 2007

A Good Word for Hedge Fund Activism - New York Times

A Good Word for Hedge Fund Activism - New York Times:
"...the evidence shows that for the most part, buy-and-hold investors ought to cheer when hedge funds jump aggressively into a stock, according to a new study. Titled “Hedge Fund Activism, Corporate Governance and Firm Performance,” it was written by Alon Brav, a finance professor at Duke; Wei Jiang, an associate professor of finance and economics at Columbia; Frank Partnoy, a law professor at the University of San Diego; and Randall S. Thomas, a professor of law and business at Vanderbilt."

Two other quotes:

* "In the year after that initial month of market-beating performance, the average target company’s stock kept pace with the overall market. And over the subsequent two years, the professors also found, the operating performance of the target companies improved markedly."

* "Hedge funds provide an example of effective shareholder activism,” Professor Brav says. He noted that “when other institutional investors engage in activism — such as pension funds or mutual funds — they typically have not been effective in improving firm performance.”"

I won't comment on the paper itself since it says not to cite it, but since it is in the NY Times I can at least point you to a preliminary version of the paper in question.

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