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

dc.contributor.author Chen, Huimin
dc.contributor.author Shohfi, Thomas
dc.date.accessioned 2018-11-27T19:14:02Z
dc.date.available 2018-11-27T19:14:02Z
dc.date.issued 2018-08-31
dc.description.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.
dc.identifier.uri http://hdl.handle.net/10125/59322
dc.subject Analysts
dc.subject Buy-Side
dc.subject Hedge Fund Activism
dc.subject Hedge Funds
dc.subject Sell-Side
dc.subject Shareholder Activism
dc.title Voice and Action: Sell-Side Analysis and Hedge Fund Activism
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