Long-Term Economic Consequences of Hedge Fund Activist Interventions

Long-Term Economic Consequences of Hedge Fund Activist Interventions

Ed deHaan, David Larcker, Charles McClure

Series number :

Serial Number: 

Date posted :

October 19 2018

Last revised :

October 19 2018
SSRN Share


  • Hedge Fund Activist Interventions • 
  • Activist Interventions • 
  • Activist Hedge Funds • 
  • shareholder wealth • 
  • pre-activism performance • 
  • shareholders • 
  • Government policy and regulation • 
  • Corporate governance

We examine the long-term effects of interventions by activist hedge funds. Prior papers document positive equal-weighted long-term returns and operating performance improvements following activist interventions, and typically conclude that activism is beneficial. We extend prior literature in two ways.

First, we find that equal-weighted long-term returns are driven by the smallest 20% of firms with an average market value of $22 million. The larger 80% of firms experience insignificant negative long-term returns. On a value-weighted basis, which likely best gauges effects on shareholder wealth and the economy, we find that pre-to-post activism long-term returns are insignificantly different from zero. For operating performance, we find that prior results are a manifestation of abnormal trends in pre-activism performance. Using an appropriately matched sample, we find no evidence of abnormal post-activism performance improvements. Overall, our results do not strongly support the hypothesis that activist interventions drive long-term benefits for the typical shareholder.

Published in

Published in: 
Publication Title: 
Review of Accounting Studies
Review of Accounting Studies, Long-term economic consequences of hedge fund activist interventions June 2019, Volume 24, Issue 2, pp 536–569
Saturday, June 1, 2019


Real name:
Ed deHaan
Real name:
Charles McClure