Comments on:

Hedge Fund Activism, Corporate Governance, and Firm Performance

Dr. Joseph R. MasonDrexel University, The Wharton School, and Federal Deposit Insurance Corporation

Overall Objective of Paper

Define HF Activism

Identify HF Selections

Measure HF Effects

Define HF Activism: Wide Variety of HF Strategies

Fundamental Underlying

Information

Capital

Define HF Activism: Wide Variety of HF Strategies

Fundamental Underlying

Information

Capital

Define HF Activism: Wide Variety of HF Strategies

Fundamental Underlying

Information

Capital

Define HF Activism: Wide Variety of HF Strategies

Fundamental Underlying

Information

Capital

Regulatory Arbitrage

Regulatory Arbitrage: Hedge Fund Voting

Is this activism by BJPT

definition?

Identifying HF Selections

Selection is partially the firm, but also the level of activism.

Category 1, “Communicate with board/management…”

Category 7, HF “intends to take full control…” Many ways to econometrically differentiate

levels of activism. GIM 2003 QJE

Selection bias (with truncation): Only see those that HF invest in beyond threshold.

Partial observability bias: Don’t see rejected investment opportunities.

Measure HF Effects: Other Tests

Post-“activism” operating performance.

Performance of HF pursuing “activist” agendas.

All models estimated on basis of predicted “activism level” and Heckman methods

Overall Objective of Paper

Define HF Activism Think hard about def’n of activism

Identify HF Selections Think hard about distinctions between objectives Think hard about selection-obervability-act, level.

Measure HF Effects Formal selection model

Estimate with care: Results fascinating!