Researcher ORCID Identifier
0009-0001-1189-0710
Graduation Year
2024
Date of Submission
12-2023
Document Type
Open Access Senior Thesis
Degree Name
Bachelor of Arts
Department
Economics
Reader 1
Eric Hughson
Terms of Use & License Information
Rights Information
© 2023 Zara Vakath
Abstract
It is well known that firms targeted by activist hedge funds experience positive abnormal stock returns during the campaign announcement window. However, the link between these short-term returns and the impact to long-term target firm performance has not been established. In this study, I find essentially no link between the positive announcement window returns and long-term performance improvements, using a variety of different methods. I examine performance changes over time and also relative to a matched sample of firms that have not been targeted by activist hedge funds. Additionally, I assess the correlation between the magnitude of short-term abnormal stock returns and long-term performance changes, finding no correlation. Finally, I repeat all the analysis for a sub-sample of campaigns initiated by the top 10 activist hedge funds. Although the firms targeted by these hedge funds are more successful pre-intervention and experience a statistically significant higher abnormal stock return, the long-term results for this sub-sample are economically and statistically insignificant as well. In aggregate, I find that activist hedge fund campaigns have no economic effect on the long-term performance of target firms, despite the large positive market reaction to campaign announcements.
Recommended Citation
Vakath, Zara, "Activism Aftershocks: Looking Beyond the Short-Term Stock Surges Caused by Activist Hedge Fund Campaign Announcements" (2024). CMC Senior Theses. 3501.
https://scholarship.claremont.edu/cmc_theses/3501
