2023-Azimjon Kuvandikov
Do activist hedge funds transfer wealth from employees to themselves in merger and acquisition deals?
Dr Azimjon Kuvandikov (PI), University of Essex; Prof Andrew Pendleton (Co-I), University of New South Wales; and Dr Marc Goergen, IE University - Do activist hedge funds transfer wealth from employees to themselves in merger and acquisition deals?
Grant Ref: 2023-375-T2
Grant Amount: £3,985.86
Project Summary: The project will investigate whether mergers and acquisitions (M&A) initiated by activist hedge funds (AHFs) facilitate wealth transfers from employees to short-term-oriented shareholders. AHFs typically initiate corporate restructurings, such as M&A deals, divestments, and changes in corporate governance structures. They generate substantial shareholder gains by actively monitoring the M&A deals of their investee firms and requiring large-scale post-merger restructurings, such as workforce reductions. While such M&As create short-term shareholder gains, there is yet limited evidence on the long-term shareholder gains and on the drivers of such gains after restructurings.
This project will analyse the relationship between shareholder gains and changes in the workforce when AHFs own equity stakes in an acquiring or acquired firm. It will examine the impact of AHFs on takeover premiums, short- and long-run abnormal share price returns and post-merger labour cost savings. It will also study the moderating role of corporate governance variables (such as board composition, board independence, board ownership, and large block-holders’ ownership) in explaining any association between shareholder gains and AHF ownership within the M&A context.
The following are the main research questions:
1) What are shareholders’ short- and long-term gains in M&A deals involving AHFs?
2) What are the main drivers of shareholder gains in M&As involving AHFs?
3) What is the impact of M&As involving AHFs on other stakeholder groups (such as employees and long-term-oriented
investors)?