Caught in the Cross-Fire: Creditor Reaction to the Threat of Hedge Fund Activism

The Dark Side of Hedge Fund Activism: Evidence from Employee Pension Plans

“…We find no empirical support for several alternative hypotheses such as voluntary changes adopted by management, activists' stock-picking skills, and improvements due to mean-reversion. Overall, this study extends the literature showing that HF activism transfers wealth from other stakeholders to shareholders (see, e.g., Klein and Zur, 2011;Brav, Jiang, and Kim, 2015;and Feng, Xu, and Zhu, 2016). Our empirical results point to a negative of HF activism on workers' welfare.…”

“…First, we provide empirical evidence on a source of shareholder gains from HF activism. Prior studies of HF activism find mixed evidence of wealth transfers from debtholders (Brav, Jiang, Partnoy, and Thomas, 2008;Uchida and Xu, 2008;Aslan and Maraachilian, 2009;Huang, 2009;Jiang, Li, and Wang, 2009;Kim, 2009, Klein andZur, 2011;Sunder, Sunder, and Wongsunwai, 2015;and Feng, Xu, and Zhu, 2016) and some evidence of wealth transfers from employees (Brav, Jiang, and Kim, 2015;and Popadak, 2014). Our paper complements this literature by showing that employee pensions suffer in HF activism events.…”