Date of Submission
Campus Only Senior Thesis
Bachelor of Arts
Hedge fund activism continues to occupy a prominent place atop the worlds of finance and corporate America, frequently gracing the front pages of eminent newspapers such as The Wall Street Journal and The New York Times alike. However, the industry itself has been the subject of rapid change and legislative scrutiny over the preceding decade, as new entrants have led longtime stalwarts of the likes of Carl Icahn and JANA Partners to modify their existing repertoire of strategies and expand their universe of targets. This paper delves into two distinct issues that remain understudied within the existing academic literature: the determinants of a hedge fund’s level of intensity that it employs in a campaign and its effect on campaign length, and the current adequacy of the SEC-mandated 10-day filing window for Form 13Ds. I use sample sizes of 1,117 publicly filed campaigns and 184 under-the-threshold investments, encompassing data from 1995 to the present, for my analysis of campaign intensity levels and 229 observations from 2013-present for my assessment of the 13D filing window. Activism campaigns are found to have become, overall, significantly more intense since the financial crisis, and both the market cap of a target company and its industry are revealed to be determinants of the level of intensity a hedge fund chooses to employ. Additionally, as expected, the degree of a campaign’s intensity is found to be a statistically significant determinant of the length of a campaign, with more aggressive tactics resulting in longer investment periods, and the presence of more passive strategies leading to shorter campaigns. Furthermore, I find that the number of pages in a 13D filing is a significant determinant of the time it takes a hedge fund to file. However, outsized abnormal returns (BHARs) are found to take place during the days between when a hedge fund breeches the 5% ownership threshold and when it files its public disclosure, and the number of days in this ‘secret period’ is revealed to be a significant determinant of the BHARs during this window, both of which indicate that market efficiency would considerably improve if the 10-day filing window was shortened. My results provide valuable information for everyday traders looking to place positions in companies targeted by activist investors, hedge fund practitioners hoping to gain an edge over their peers, and companies and advisors looking to better understand the activist landscape. Perhaps most importantly, my observations concerning the 13D filing window can inform regulators of the possible impact of altering the laws governing the industry.
Dorman, Joshua, "What Moves the Needle in Hedge Fund Activism? An Empirical Assessment of Campaign Intensity and Regulatory Insufficiency" (2020). CMC Senior Theses. 2476.
This thesis is restricted to the Claremont Colleges current faculty, students, and staff.