【IMI Working Paper No. 1902 [EN]】The Role of Derivatives in Hedge Fund Activism
Using a hand-collected sample of hedge fund activist engagements from 1994 to 2014, this study analysed the role of derivatives in the hedge fund activism. Evidence shows abnormal returns of targets of hedge fund activists who did not use derivatives exceeded the abnormal returns of targets of hedge fund activists who employed derivatives around the activist engagement disclosure period. We also find that idiosyncratic volatility of targets of hedge fund activists who did not use derivatives was more reduced than those of targets of hedge fund activists who used derivatives. Finally, the probability of takeovers increases for hedge fund activists who did not use derivatives.
Hedge Funds, Investor Activism, Mergers & Acquisitions, Event Studies, Derivatives
Guo Jie (Michael), Durham Business School, Mill Hill Lane, Durham, DH1 3LB, UK.
Gang Jianhua, China Financial Policy Research Centre, School of Finance, Renmin University of China; Research fellow of IMI, Beijing, China.
Hu Nan, Adam Smith Business School, Glasgow University, Glasgow, G12 8QQ, UK.
Vinay Utham, Durham Business School, Mill Hill Lane, Durham, DH1 3LB, UK.
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