Institutional Trading and Hedge Fund Activism

• 成果类型: Article
• 署名作者: Gantchev, Nickolay; Jotikasthira, Chotibhak
• 署名单位: University of North Carolina; University of North Carolina Chapel Hill; University of North Carolina School of Medicine; Southern Methodist University
• 刊物名称: MANAGEMENT SCIENCE
• ISSN/ISSBN: 0025-1909
• DOI: 10.1287/mnsc.2016.2654
• 发表日期: 2018
• 页码: 2930-2950
• 关键词: SHAREHOLDER ACTIVISM; corporate governance; institutional investors; Hedge funds

摘要

This paper investigates the role of institutional trading in the emergence of hedge fund activism-an important corporate governance mechanism. We demonstrate that institutional sales raise a firm's probability of becoming an activist target. Furthermore, by exploiting the funding circumstances of individual institutions, we establish that such effects occur through a liquidity channel, i.e., the activist camouflages his purchases among other institutions' liquidity sales. Additional evidence supports our conclusion. First, activist purchases closely track institutional sales at the daily frequency. Second, such synchronicity is stronger among targets with lower expected monitoring benefits, suggesting that gains from trading with other institutions supplement these benefits in the activist's targeting decision. Finally, we find that institutional sales accelerate the timing of a campaign at firms already followed by activists rather than attract attention to unlikely targets. Taken together, our findings offer a novel empirical perspective on the liquidity theories of activism; while activists screen firms on the basis of fundamentals, they pick specific targets at a particular time by exploiting institutional liquidity shocks.