Purpose

The purpose of this paper is to examine the effectiveness of hedge fund activism (HFA) in preventing corporate policy deviations.

Design/methodology/approach

This paper identifies HFA interventions through a hand-collected sample of Schedule 13D filings between 1994 and 2016, and uses mechanical mutual fund fire sales as the instrument variable (IV) for the likelihood of such interventions. Armed with the instrument, this paper estimates firm's distribution, managerial compensation and investment policies in response to a change in the perceived likelihood of HFA interventions.

Findings

An increase in the HFA intervention likelihood leads to increases in shareholder distribution, decreases in CEO pay and investments and increases in operating performance. Compared to the sample average, a one standard deviation increase in the intervention likelihood leads to a 9.29% increase in the firm's payout ratio, a 7.42% decrease in CEO compensation, a 2.67% decrease in capital expenditures and a 4.96% decrease in R&D expenses. These changes are consistent with the threat of intervention curbing managerial empire-building behaviors and improving firm operation. The relationships are causal, significant and robust to a variety of alternative specifications and sample divisions.

Originality/value

Results of this paper suggest that as a mechanism for corporate governance, the threat of HFA is effective in preventing corporate policy deviations. They also demonstrate a stronger and broader impact of HFA on corporate policy than previously documented. By showing that HFA is an effective and viable mechanism for corporate governance, this study allows policymakers to make more informed decisions to whether increase hedge fund regulations or not.

中文翻译：

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对冲基金行动主义的预防作用：投资，首席执行官薪酬和支出政策

目的

本文的目的是检验对冲基金行动主义（HFA）在防止公司政策偏差方面的有效性。

设计/方法/方法

本文通过在1994年至2016年之间手工收集的附表13D申请样本来识别HFA干预措施，并使用机械共同基金的抛售作为工具变量（IV）来确定此类干预措施的可能性。借助该工具，本文根据对HFA干预的感知可能性的变化，估计了公司的分配，管理人员薪酬和投资政策。

发现

HFA干预可能性的增加会导致股东分配的增加，CEO薪酬和投资的减少以及运营绩效的提高。与样本平均值相比，干预可能性增加一个标准差可导致公司的支出比率增加9.29％，CEO薪酬减少7.42％，资本支出减少2.67％和研发费用减少4.96％。 。这些变化与抑制管理帝国建立行为和改善公司运营的干预威胁相一致。这些关系是因果关系，重要的，并且对于各种替代规范和样本划分具有鲁棒性。

创意/价值

本文的结果表明，作为公司治理的一种机制，HFA的威胁可以有效地防止公司政策偏差。它们还表明，HFA对公司政策的影响比以前记录的要强大和广泛。通过证明HFA是一种有效且可行的公司治理机制，这项研究使决策者可以做出更明智的决定，以决定是否增加对冲基金的监管。