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Hedge fund activism and corporate innovation

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  • Tang, Tingfeng

Abstract

This paper investigates the impact of hedge fund activism on corporate innovating activities. It finds that innovative firms are as likely to be targeted by activist hedge funds as non-innovative firms. Activist hedge funds tend to target innovative firms with low innovation efficiency. Hedge fund interventions are associated with significant improvements in innovation output in both highly competitive and less competitive industries. The improvement is more pronounced in active intervention events. Our results suggest that activist hedge funds are not myopic investors and their interventions enhance innovative activities that benefit innovative firms’ long-term performance.

Suggested Citation

  • Tang, Tingfeng, 2020. "Hedge fund activism and corporate innovation," Economic Modelling, Elsevier, vol. 85(C), pages 335-348.
    • Handle: RePEc:eee:ecmode:v:85:y:2020:i:c:p:335-348
    DOI: 10.1016/j.econmod.2019.11.004
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    Cited by:

    1. Li, Lu & Li, Yang & He, Yuqian & Chen, Yishu, 2023. "Hedge fund ownership and the innovation of high-tech firms: Evidence from the Science and technology innovation board in China," Economics Letters, Elsevier, vol. 233(C).
    2. Christof Beuselinck & Luc Desrousseaux, 2024. "Hedge fund activism and corporate intangible capital investments," Review of Quantitative Finance and Accounting, Springer, vol. 63(1), pages 37-61, July.
    3. Bessler, Wolfgang & Vendrasco, Marco, 2022. "Corporate control and shareholder activism in Germany: An empirical analysis of hedge fund strategies," International Review of Financial Analysis, Elsevier, vol. 83(C).
    4. Oehler, Andreas & Schmitz, Jonas Tobias, 2021. "Does intensified communication of hedge funds with letters affect abnormal returns?," International Review of Economics & Finance, Elsevier, vol. 76(C), pages 127-142.
    5. Unsal, Omer, 2023. "Corporate crimes and innovation: Evidence from US financial firms," Economic Modelling, Elsevier, vol. 120(C).
    6. Cumming, Douglas & Monteiro, Pedro, 2022. "Hedge fund sales fees and the flow of funds around the world," Economic Modelling, Elsevier, vol. 112(C).
    7. Desrousseaux, Luc, 2023. "Are activist hedge funds good business advisors?," Economic Modelling, Elsevier, vol. 125(C).

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    More about this item

    Keywords

    Corporate innovation; Corporate governance; Hedge fund activism; Active intervention;
    All these keywords.

    JEL classification:

    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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