TY - JOUR TI - Essays on hedge fund activism DO - https://doi.org/doi:10.7282/T3Z89FQR PY - 2016 AB - The first essay focuses on detailed activities in hedge fund activism targets. We perform a textual analysis of 8-Ks filed by 693 firms targeted by hedge fund activists over the 2005 to 2012 period to document the comprehensive material changes that these firms undergo after being targeted. We benchmark the changes in the year after the 13D filing to those in the year prior to 13D filing, and then control for changes over the same period in propensity score matched firms. The difference-in-differences results suggest that targets of hedge fund activism that are not acquired experience significantly higher incidence of CEO appointments and director arrivals that are both associated with higher shareholder value. The evidence also suggests that some changes that activists request like repurchases, sale of assets and bylaw changes though more frequent are not associated with any value gains. The evidence complements prior work by showing that activists potentially create value through governance changes along with pressurizing the target to sell itself. The second essay investigates the role of institutional investors in hedge fund activism. Hedge funds activists do not usually hold a large stake in the target firm. Institutional owners by their support or lack thereof can have a significant impact on the success of the activist's campaign. We develop three measures of institutional ownership that is likely to be supportive of activism. Over the period 2004 to 2012 we find that high pre event activism friendly institutional ownership is associated with significantly higher short term and long term stock returns and operating performance of the target firm. Pre event ownership by activism friendly institutions also significantly increases the likelihood of being targeted by hedge fund activists. The paper is one of the first to document that composition of institutional ownership has a significant impact on the likelihood of and value created from hedge fund activism. KW - Management KW - Institutional investments KW - Hedge funds LA - eng ER -