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

The increase in institutional ownership of recent decades has been accompanied by an enhanced role played by institutions in monitoring companies’ corporate governance behaviour. Activist hedge funds and private equity firms have achieved a degree of success in actively shaping the business plans of target firms.  They may be characterized as pursuing a common goal – in the words used in the OECD Steering Group on Corporate Governance, both seek ‘to increase the market value of their pooled capital through active engagement with individual public companies.  This engagement may include demands for changes in management, the composition of the board, dividend policies, company strategy, company capital structure and acquisition/disposal plans which are normally regarded as governance issues.’ 

This article is the introductory chapter of Institutional Investor Activism: Hedge Funds and Private Equity, Economics and Regulation (Oxford University Press 2015).  The book collects descriptive expositions and empirical analyses essential for an understanding of both varieties of interventionist shareholder.  The twenty-one chapters detail these investors’ strategic approaches, the financial returns they produce, the regulatory context in which they operate, and the policy questions raised by their activities. 

The authors of the chapters, in order of appearance, are as follows: Stuart Gillan and Laura T. Starks; Lucian Bebchuk; Peter Cziraki, Luc Renneboog and Peter G. Szilagyi; Marcel Kahan and Edward Rock; John Armour and Brian Cheffins; Marco Becht, Julian Franks, Colin Mayer and Stefano Rossi; Alon Brav, Wei Jiang, Frank Partnoy and Randall S. Thomas; April Klein and Emanuel Zur; Henry T.C. Hu and Bernard S. Black; Douglas Baird and Robert K. Rasmussen; Wei Jiang, Kai Li, and Wei Wang; Steven N. Kaplan and Per Strömberg; Ludovic Phalippou; Douglas Cumming, Na Dai and Sofia A. Johan; Dan Awrey; Joseph A. McCahery and Erik P.M. Vermeulen; Lucian Bebchuk and Robert J. Jackson, Jr.; Jill E. Fisch; John C. Coffee, Jr.; and William W. Bratton and Michael L. Wachter.

William W. Bratton is the Nicholas F. Gallicchio Professor of Law and Co-Director, Institute for Law and Economics at the University of Pennsylvania Law School. Joseph A. McCahery is Professor of International Economic Law and Professor of Financial Market Regulation at the Tilburg University Faculty of Law and the Tilburg Law and Economics Center (the Netherlands).