Er hedgefondaktivisme positivt for aktionærerne? - Et europæisk studie

Nikolaj D. Bang & Kristoffer W. Nøhr

Student thesis: Master thesis


This paper investigates hedge fund activism in a European context, a scarcely covered area in the literature. The phenomena is relatively new in Europe and has been met with some skepticism, as critics claim that hedge fund activists are myopic investors, seeking short-term gains at the expense of long-term value creation. This paper seeks to determine whether hedge fund activists are indeed myopic investors, or if they are able to generate positive effects for shareholders of European companies. Following the event study methodology, it is tested whether hedge fund activism is related to a statistically significant, positive abnormal return on both the short- and long-term. The event study is based on a dataset covering the period from 1 January 2000 to 15 February 2015. The shortterm analysis includes 177 campaigns while the long-term analysis includes 159 campaigns. On the short-term, an abnormal return of 2.27 pct. is found, which is statistically significant from zero on a 1 pct. level. On the long-term, a positive abnormal return of 7.64 pct. is found, also statistically significant from zero on a 1 pct. level. The dataset therefore provides statistical evidence that hedge fund activism is indeed positive for shareholders of European companies, and that their campaigns do not seem to indicate myopic behavior, as critics claim. In addition, it is tested how a range of campaign-specific issues relate to the abnormal return. Four main conclusions are drawn from this test. First, no evidence is found that the effect of hedge fund activism should differ between campaigns led against companies from different European regions. Secondly, the study indicates that Americanbased hedge fund activists provide higher abnormal returns than European-based hedge fund activists on the short-term, while the difference cancels out on the long-term. Thirdly, campaigns involving a demand related to M&A seem to be creating the highest abnormal return on the short-term, while business related campaigns lead to the highest abnormal return on the long-term. Finally, there does not seem to be any significant difference in the abnormal return between campaigns in which the hedge fund succeeds in obtaining one or all of its demands, and in campaigns where it does not. The fact that hedge fund activism is found to create an abnormal return has interesting implications. Most importantly, while institutional investors seem to be increasing their support of hedge fund activists, the legislative bodies seem to counter these positive effects through tighter regulation. While this regulation is introduced for legitimate reasons, including increased market transparency and fairness, it may hamper the positive effects of hedge fund activism on the overall market, if all effects of introducing new regulation is not thoroughly understood. Further research is needed, however, in order to fully comprehend the dynamics of hedge fund activism in Europe.

EducationsMSc in Finance and Accounting, (Graduate Programme) Final Thesis
Publication date2017
Number of pages133
SupervisorsCaspar Rose