Hedge fund activism's impact on CSR performance - HEC Paris Research

Описание: New research at HEC Paris finds that hedge fund activism leads to a decline in targeted companies’ market value and social responsibility performance four and five years after intervention comparatively to similar firms

Hedge fund activism can seriously hamper the long-term sustainability of targeted firms. This is the core finding of a new, large-scale study by Mark DesJardine, Professor of Strategy and Sustainability at Pennsylvania State University’s Smeal College of Business, and Rodolphe Durand, Professor of Strategy at HEC Paris and academic director of the school’s Society & Organizations Center.

The results unveiled three unexpected effects of hedge fund activism on the long-term outcomes of companies. The first one is an inevitable fall in company value after a short-lived rise. Also, compared to non-targeted firms, corporate social responsibility (CSR) plans are more likely to be abandoned within targeted companies. And thirdly, a fall in the number of employees, operating expenses, capital expenditures, and R&D spending were identified. Generally speaking, the findings collectively reveal that companies targeted by activist hedge funds begin to prioritize near-term profit maximization over making long-term investments and advancing sustainability plans.

Click here to open access to the article : https://onlinelibrary.wiley.com/doi/f...

Knowledge@HEC Articles:
Activist Hedge Funds: Good for Some, Bad for Others?
https://www.hec.edu/en/knowledge/arti...
Why Activist Hedge Funds Target Socially Responsible Firms, and How Executives and Investors Can Counteract Them
https://www.hec.edu/en/knowledge/arti...

HBR Article (in French)
https://www.hbrfrance.fr/chroniques-e...