Do Activists Align with Larger Mutual Funds?

ArXiv ID: 2411.16553 “View on arXiv”

Authors: Unknown

Abstract

This paper demonstrates that hedge funds tend to design their activist campaigns to align with the preferences and ideologies of institutions holding large stakes in the target company. I estimate these preferences by analyzing the institutions’ previous proxy voting behavior. The results reveal that activists benefit from this approach. Campaigns with a stronger positive correlation between the preferences of larger institutions and activist communications attract more shareholder attention, receive more votes, and are more likely to succeed.

Keywords: Activist Hedge Funds, Proxy Voting, Shareholder Activism, Institutional Investors, Corporate Governance

Complexity vs Empirical Score

• Math Complexity: 5.5/10
• Empirical Rigor: 8.0/10
• Quadrant: Street Traders
• Why: The paper employs advanced statistical techniques like Support Vector Regression and detailed regression analysis, but the focus is heavily on empirical data analysis and backtesting correlations with real-world outcomes (e.g., SEC filings, voting records).

  flowchart TD
    A["Research Question<br>Do activist hedge funds align with larger institutions?"] --> B["Data Collection<br>Activist campaigns, proxy votes, 13F filings"]
    B --> C["Methodology<br>Estimate institution preferences via voting history"]
    C --> D["Computation<br>Correlation between activist communications and<br>institution preferences"]
    D --> E["Outcome 1<br>Stronger alignment attracts more shareholder attention"]
    D --> F["Outcome 2<br>Higher alignment receives more proxy votes"]
    D --> G["Outcome 3<br>Campaigns with alignment are more likely to succeed"]