Voice and Action: Sell-Side Analysis and Hedge Fund Activism

Date
2018-08-31
Authors
Chen, Huimin
Shohfi, Thomas
Contributor
Advisor
Department
Instructor
Depositor
Speaker
Researcher
Consultant
Interviewer
Journal Title
Journal ISSN
Volume Title
Publisher
Volume
Number/Issue
Starting Page
Ending Page
Alternative Title
Abstract
Recent literature has shown hedge fund activism to be an important external corporate governance mechanism. Sell-side analysts, however, provide idea generation and analysis to buy-side clients including hedge funds. Using a propensity score matched sample, we examine sell-side analyst activity around hedge fund activism. We find that declining trends in analyst coverage begin in the year before hedge fund intervention and continue afterward. Stock market responses to analyst reports are negative before hedge fund intervention but revert to positive after. We introduce a new textual analysis dictionary to identify the activism objectives and tactics of Brav, Jiang, Partnoy, and Thomas (2008) within analyst reports and show pre-event sell-side reports contain significantly more language related to subsequent activism. Higher activism dictionary content in sell-side reports is correlated with activism-date target stock performance and predicts multiple activist interventions. Our results suggest that critical voice of sell-side analysis reveals coverage firm flaws that influence subsequent hedge fund intervention outcomes.
Description
Keywords
Analysts, Buy-Side, Hedge Fund Activism, Hedge Funds, Sell-Side, Shareholder Activism
Citation
Extent
Format
Geographic Location
Time Period
Related To
Rights
Rights Holder
Email libraryada-l@lists.hawaii.edu if you need this content in ADA-compliant format.