The Labor Market Effects of Hedge Fund Activism
Publication Date
4-21-2023
Grant Type
Early Career Research Award
Description
We are seeking funding to explore how hedge fund activism affects wage and employment outcomes of workers and inequality in the U.S. Hedge fund activism emerged as a major force of corporate governance in the 2000s. It refers to the practice of hedge funds, which are investment funds that use high-risk strategies, influencing the management and strategic decisions of the companies in which they hold significant stakes. By the mid-2000s, there were between 150 and 200 activist hedge funds in action each year, advocating for changes in 200–300 publicly listed companies in the U.S. There are over 2,000 activism events in the U.S. between 1994 and 2011. Hedge fund activism can lead to increased shareholder value and improved corporate governance by pushing for changes such as cost-cutting measures, management shakeups, and strategic shifts that can boost a company's performance. However, it can also have negative effects, such as short-term focus on financial performance over long-term sustainability and neglecting other stakeholders' interests.