Shareholder Activism Around the Globe: Hedge Funds vs. Other Professional Investors

Abstract

Shareholder activism has sharply increased over the past decade and spread both across countries and among different types of investors. Today, 50% of all engagements occur outside North America, with non-hedge fund investors accounting for one-third of all engagements. We investigate the effects and drivers of hedge fund and non-hedge fund activism using an international dataset of 2,689 activist engagements across 44 countries between 2008 and 2019. Activist investments in North America, on average, yield the largest immediate positive stock market returns and buy-and-hold returns, followed by engagements in Europe and the Asia-Pacific region. In North America, short-term abnormal returns for hedge funds are at a similar level as those for non-hedge funds, but in Europe and the Asia-Pacific region, they are higher for non-hedge funds. However, globally, hedge funds achieve higher buy-and hold returns and are more successful than non-hedge funds in implementing change in target firms. Over time, our results suggest unfulfilled investor expectations, as announcement returns are increasing but (abnormal) buy-and-hold returns and the impact on performance measures of target firms are decreasing for both hedge funds and non-hedge funds.