Revisiting The Myopic-Activists Claim of Short-Termism : Assessing The Long-Term Effects of Hedge Fund Activists on Firm Operational Performance

This paper revisits the short-termism argument by focusing on the long-term effects of hedge fund activists on firm operational performance. We find evidence that hedge fund effects are positively related to firm performance and are long-term. Moreover, such effects continue well into the fifth-year post intervention. Furthermore, such a positive relationship holds up even when accounting for industry-specific effects. However, we find mixed results when accounting for firm-specific effects. This suggests that some firms experience internal fluctuations post hedge fund intervention that may well include CEOs turnover as reported by other research. We used a set of five accounting measures of firm performance, employed a dataset of 2,590 observations, and assessed hedge funds’ effects on firm operational performance during a seven-year period. Overall, our results are aligned with findings reported by the paucity of studies that explored the long-term effects of activists’ intervention on focal firms, and which offer no support for the short-termism claim