Institutional Investor Activism - Hedge Funds and Private Equity, Economics and Regulation

The past two decades has witnessed unprecedented changes in the corporate governance landscape in Europe, the US and Asia. Across many countries, activist investors have pursued engagements with management of target companies.

More recently, the role of the hostile activist shareholder has been taken up by a set of hedge funds. Hedge fund activism is characterized by mergers and corporate restructuring, replacement of management and board members, proxy voting, and lobbying of management. These investors target and research companies, take large positions in `their stock, criticize their business plans and governance practices, and confront their managers, demanding action enhancing shareholder value.

This book analyses the impact of activists on the companies that they invest, the effects on shareholders and on activists funds themselves. Chapters examine such topic as investors' strategic approaches, the financial returns they produce, and the regulatory frameworks within which they operate. The chapters also provide historical context, both of activist investment and institutional shareholder passivity. The volume facilitates a comparison between the US and the EU, juxtaposing not only
regulatory patterns but investment styles.

List of contents

• 1: William W. Bratton and Joseph A. McCahery: Introduction


• Part I. The Disempowered Shareholder


• 2: Stuart Gillan and Laura T. Starks: The Evolution of Shareholder Activism in the United States


• 3: Lucian A. Bebchuk: The Myth of the Shareholder Franchise


• 4: Peter Cziraki, Luc Renneboog and Peter G. Szilagyi: Shareholder Activism through Proxy Proposals: The European Perspective


• Part II. Hedge Fund Activism


• A. Patterns and Policy Questions - Dark Sides and Light Sides


• 5: Marcel Kahan and Edward Rock: Hedge Funds in Corporate Governance and Corporate Control


• 6: John Armour and Brian Cheffins: The Rise and Fall (?) of Shareholder Activism by Hedge Funds


• B. Ownership Stakes, Operating Results, and Financial Returns


• 7: Marco Becht, Julian Franks, Colin Mayer and Stefano Rossi: Returns to Shareholder Activism: Evidence from a Clinical Study of the Hermes Focus Fund


• 8: Alon Brav, Wei Jiang, Frank Partnoy and Randall Thomas: Hedge Fund Activism, Corporate Governance and Corporate Performance


• 9: April Klein and Emanuel Zur: Entrepreneurial Shareholder Activism: Hedge Funds and Other Private Investors


• C. Strategic Holding versus Collective Interest: Empty Voting and Bankruptcy Reorganization


• 10: Henry T.C. Hu and Bernard S. Black: Debt, Equity and Hybrid Decoupling: Corporate Governance and Systemic risk Implications


• 11: Douglas Baird and Robert K. Rasmussen: Common Pools, Common Disasters and the Anti-Commons: Hedge Fund Activity in Corporate Reorganizations


• 12: Wei Jiang, Kai Li and Wei Wang: Hedge Funds and Chapter 11


• Part III. Private Equity and Corporate Governance


• A. Structure and Motivation


• 13: Steven N. Kaplan and Per Strömberg: Leveraged Buyouts and Private Equity


• B. How has Private Equity Performed?


• 14: Ludovic Phalippou: Performance of Buyout Funds Revisited


• Part IV. The Regulatory Framework


• A. Structural Treatment of Hedge funds and Private Equity: Investor Protection and Systemic Risk


• 15: Douglas Cumming, Na Dai, and Sofia A. Johan: Hedge Fund Regulation and Governance


• 16: Dan Awrey: The Limits of EU Hedge Fund Regulation


• 17: Joseph A. McCahery and Erik P.M. Vermeulen: Recasting Private Equity Funds after the Financial Crisis: The End of 'Two and Twenty' and the Emergence of Co-Investment and Separate Account Arrangements


• B. Regulation and the Costs and Benefits of Shareholder Activism


• 18: Lucian A. Bebchuk and Robert J. Jackson,Jr.: The Law and Economics of Blockholder Disclosure


• 19: Jill E. Fisch: The Destructive Ambiguity of Federal Proxy Access


• C. Law Reform: the Burden of Persuasion


• 20: William W. Bratton and Michael L. Wachter: The Case Against Shareholder Empowerment

About the author

William Bratton is Nicholas F. Gallicchio Professor of Law and Co-Director of the Institute for Law & Economics at the University of Pennsylvania Law School. He is recognized internationally as a leading writer on business law. He brings an interdisciplinary perspective to a wide range of subject matters that encompass corporate governance, corporate finance, accounting, corporate legal history, and comparative corporate law. His work has appeared in the California, Cornell, Michigan, Northwestern, Pennsylvania, Southern California, Stanford, and Virginia law reviews, and the Duke and Georgetown law journals amoung others. His book, Corporate Finance: Cases and Materials (Foundation Press, 7th ed. 2012), is the leading law school text on the subject. Bratton is a Research Associate of the European Corporate Governance Institute. In 2009, he was installed as the Anton Philips Professor at the Faculty of Law of Tilburg University, the fifth American academic to hold the chair.

Joseph A. McCahery is Professor of International Economic Law at TILEC and Tilburg University School of Law. He is Program Director of the Finance and Law programs at Duisenberg school of finance. Previously, he held the Goldschmidt Visiting Chair of Corporate Governance at the Solvay Business School of the University of Brussels and Chair in Corporate Governance and Innovation at the University of Amsterdam Faculty of Business and Economics. He is co-director of the Amsterdam Center for Corporate Finance. He has contributed to the literature on banking and securities law, corporate law, corporate governance, the political economy of federalism, and taxation and has published in a wide range of top academic journals. He is a Research Associate of the European Corporate Governance Institute. He has served as a legal expert for the Centre for European Policy Studies, Monitoring Committee Corporate Governance, The Netherlands Ministry of Finance, OECD, and other governmental organizations.

Summary

The past two decades has witnessed unprecedented changes in the corporate governance landscape in Europe, the US and Asia. Across many countries, activist investors have pursued engagements with management of target companies.

More recently, the role of the hostile activist shareholder has been taken up by a set of hedge funds. Hedge fund activism is characterized by mergers and corporate restructuring, replacement of management and board members, proxy voting, and lobbying of management. These investors target and research companies, take large positions in `their stock, criticize their business plans and governance practices, and confront their managers, demanding action enhancing shareholder value.

This book analyses the impact of activists on the companies that they invest, the effects on shareholders and on activists funds themselves. Chapters examine such topic as investors' strategic approaches, the financial returns they produce, and the regulatory frameworks within which they operate. The chapters also provide historical context, both of activist investment and institutional shareholder passivity. The volume facilitates a comparison between the US and the EU, juxtaposing not only regulatory patterns but investment styles.

Additional text

Hedge fund activism and private equity have become central for corporate governance in recent years. This books collects impressive papers from some of the most prominent academics in the field, which is now richer for the editors and authors efforts.

Report

Bratton and McCaherys edited volume addresses todays most fundamental question regarding the governance of dispersed-ownership corporations: have private equity and activist hedge funds solved the problem of the separation of ownership from control? This remarkable collection of essays by the worlds leading corporate governance scholars will play a critical role in shaping the discussion in both academic and policy circles for many years to come. Merritt B. Fox, Michael E. Patterson Professor of Law, NASDAQ Professor for Law and Economics of Capital Markets, Columbia University Law School

Product details

• Authors: William Bratton, William (Nicholas F. Gallicchio Profesor Bratton, William Mccahery Bratton
• Assisted by: William Bratton (Editor), William (Nicholas F. Gallicchio Profesor of Law and Co-Director Bratton (Editor), Joseph A McCahery (Editor), Joseph A. McCahery (Editor), Joseph A. (Program Director of Finance and Law at Duisenberg School of Finance McCahery (Editor)
• Publisher: Oxford University Press
• Languages: English
• Product format: Paperback / Softback
• Released: 20.08.2015
• EAN: 9780198723943
• ISBN: 978-0-19-872394-3
• No. of pages: 816
• Subjects: Education and learning > Vocational and technical college books; Social sciences, law, business > Business > Business administration