Review of Accounting Studies

, Volume 24, Issue 2, pp 536–569 | Cite as

Long-term economic consequences of hedge fund activist interventions

  • Ed deHaan
  • David LarckerEmail author
  • Charles McClure


We examine the long-term effects of interventions by activist hedge funds. Research documents positive equal-weighted long-term returns and operating performance improvements following activist interventions, and typically conclude that activism is beneficial. We extend the literature in two ways. First, we find that equal-weighted long-term returns are driven by the smallest 20% of firms, with an average market value of $22 million. The larger 80% of firms experience insignificant negative long-term returns. On a value-weighted basis, which likely best gauges the effects on shareholder wealth and the economy, we find that pre- to post-activism long-term returns insignificantly differ from zero. For operating performance, we find that prior results are a manifestation of abnormal trends in pre-activism performance. Using an appropriately matched sample, we find no evidence of abnormal post-activism performance improvements. Overall, our results do not strongly support the hypothesis that activist interventions drive long-term benefits for the typical shareholder, nor do we find evidence of shareholder harm.


Hedge fund activists Long-term economic value of activism 

JEL Classification

G34 G38 G14 M41 M48 



We thank Ian Gow, Jon Karpoff, and Eric So for helpful advice and Alon Brav for kindly sharing data on hedge fund activism. We gratefully acknowledge the support of the Stanford Rock Center for Corporate Governance, the Centers & Initiatives for Research, Curriculum and Learning Experiences (CIRCLE), the University of Washington’s Foster School of Business, the FMC Faculty Research Fund, and the University of Chicago’s Booth School of Business.


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Copyright information

© Springer Science+Business Media, LLC, part of Springer Nature 2019

Authors and Affiliations

  1. 1.Foster School of BusinessUniversity of WashingtonSeattleUSA
  2. 2.Graduate School of Business, Rock Center for Corporate GovernanceStanford UniversityStanfordUSA
  3. 3.Booth School of BusinessUniversity of ChicagoChicagoUSA

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