The Effects of Activist Investors on Firms’ Mergers and Acquisitions

Abstract

We investigate the effects of activist investors on firm acquisitions, where activist investors include both hedge fund activists and entrepreneurial activists (venture capital funds, private equity funds, and individual investors). For completed deals, acquirers with activist investors experience significantly higher announcement cumulative abnormal returns compared to acquirers without activist investors. In addition, acquirers with activist investors are more likely to withdraw from value‐destroying transactions. Furthermore, the market reacts more favorably to acquirers with activists than to those without activists when these value‐destroying transactions are withdrawn. Our results highlight the role of activist investors in aligning managers’ and shareholders’ interests in acquisition decisions.

Deal motivations and bargaining power: do executives show their hand in SEC filings?

“…The authors conclude that the offer premium often signals a larger combined gain rather than an increase in the target-firm managers' bargaining power. Similarly, Swidler et al (2019) find that acquirers with activist investors earn higher announcement period returns than acquirers without activists. The authors also find that acquiring firms with activist investors are more likely to reverse bad takeover decisions.…”

Disruptor Recognition and Market Value of Incumbent Firms: Airbnb and the Lodging Industry

“…We calculated daily cumulative abnormal returns (CAR) using a three-factor Fama-French model (Fama & French, 1992), similar to Swidler et al (2019), Hua et al (2016), and Kim et al (2019), for the press release dates of the Airbnb milestones. A window of 1 ( t 0 ), 3 ( t − 1 to t 1 ), and 7 ( t − 2 to t 4 ) days surrounding the press release date was used.…”

“…where S e j , t is the standard error of the abnormal return and T is the number of days that have been used for the estimation period (a total of 80 days between -100 and -20 days from the day each milestone became public). The estimation period allows us to benchmark every firm result with each of its own past results (Swidler et al, 2019). v j 2 represents the variance of the stock, R true m ~ is the average market return in the period of estimation, and R m , d is the market return for day d .…”

“… v j 2 represents the variance of the stock, R true m ~ is the average market return in the period of estimation, and R m , d is the market return for day d . Finally, we calculated the cumulative abnormal return (CAR) over the three event period intervals: 1 day ( t 0 ), 3 days ( t − 1 , t 1 ), and 7 days ( t − 2 , t 4 ), around the event (Swidler et al, 2019).…”

Early and late-stage startup funding in hospitality: Effects on incumbents' market value

“…We estimate the effect of each funding round using three different time windows: the day of the event 𝑡 0 , three days ( 𝑡 −1 to 𝑡 1 ), and seven days ( 𝑡 −2 to 𝑡 4 ) around the event date. Increasing time windows are used to estimate effects on the market for different days after the event and to allow for any leakage of the news prior to the event (Swidler, Trinh, & Yost, 2019). t-test is employed to examine if there is a significant difference between observed CARs post founding rounds in each time window and counterfactual CARs which assumes no events happened.…”