Economics and Business Review

ISSN 2392-1641
e-ISSN 2450-0097

Poznań University of Economics - Poland

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Volume 3 (17) Number 1 pp. 38-72

Andrew Carrothers

University of Prince Edward Island, Canada

Friends or foes? Activist hedge funds and other institutional investors

Abstract:

The aim of this paper is to contribute to the understanding of the relationship between activist hedge funds and other institutional investors. Hedge funds are more likely to target firms with high levels of institutional ownership and demonstrate a preference for short-term focused institutional investors. Hedge fund activism generates short run and long run abnormal returns without increasing stock return volatility.
Regardless of the investment horizon, volatility is inversely related to prior period institutional ownership. The trading behavior of institutional owners with different investment horizons is consistent with hedge fund activism creating value. These findings hold regardless of whether investment horizon is based on portfolio churn rate or type of institution. Overall the results suggest a mutually beneficial relationship between activist hedge funds and other institutional investors.

pub/2017_1_38.pdf Full text available in in Adobe Acrobat format:
http://www.ebr.edu.pl/volume17/issue1/2017_1_38.pdf
Keywords: hedge funds, shareholder activism, institutional investors, corporate governance

DOI: 10.18559/ebr.2017.1.3

For citation:

MLA Carrothers, Andrew. "Friends or foes? Activist hedge funds and other institutional investors." Economics and Business Review EBR 17.1 (2017): 38-72. DOI: 10.18559/ebr.2017.1.3
APA Carrothers, A. (2017). Friends or foes? Activist hedge funds and other institutional investors. Economics and Business Review EBR 17(1), 38-72 DOI: 10.18559/ebr.2017.1.3
ISO 690 CARROTHERS, Andrew. Friends or foes? Activist hedge funds and other institutional investors. Economics and Business Review EBR, 2017, 17.1: 38-72. DOI: 10.18559/ebr.2017.1.3