{"title":"Hedge fund activism, R&D efficiency and firm value","authors":"","doi":"10.1016/j.ribaf.2024.102494","DOIUrl":null,"url":null,"abstract":"<div><p>We investigate the effectiveness of hedge fund activism in addressing inefficient R&D investment and creating long-term value at target firms. Using an endogenous growth model to estimate efficient R&D investment levels, we find target firms exhibit a tendency to overinvest in R&D. The likelihood of being targeted and activism announcement returns increase with R&D overinvestment. Despite observable cuts in R&D expenditure following activism, our analysis shows no significant improvement in R&D efficiency over the subsequent three years. Additional tests, controlling for the activist’s objectives, reputation, and stock selection ability, reveal a negative impact of activism on value creation. Our study offers important insights into how hedge fund activism shapes corporate R&D strategies and highlights challenges in achieving sustainable innovation and value enhancement through activist interventions.</p></div>","PeriodicalId":51430,"journal":{"name":"Research in International Business and Finance","volume":null,"pages":null},"PeriodicalIF":6.3000,"publicationDate":"2024-08-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://www.sciencedirect.com/science/article/pii/S0275531924002873/pdfft?md5=ab0ddd8f15b850d774d01f1c2a4392a3&pid=1-s2.0-S0275531924002873-main.pdf","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Research in International Business and Finance","FirstCategoryId":"96","ListUrlMain":"https://www.sciencedirect.com/science/article/pii/S0275531924002873","RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q1","JCRName":"BUSINESS, FINANCE","Score":null,"Total":0}
引用次数: 0
Abstract
We investigate the effectiveness of hedge fund activism in addressing inefficient R&D investment and creating long-term value at target firms. Using an endogenous growth model to estimate efficient R&D investment levels, we find target firms exhibit a tendency to overinvest in R&D. The likelihood of being targeted and activism announcement returns increase with R&D overinvestment. Despite observable cuts in R&D expenditure following activism, our analysis shows no significant improvement in R&D efficiency over the subsequent three years. Additional tests, controlling for the activist’s objectives, reputation, and stock selection ability, reveal a negative impact of activism on value creation. Our study offers important insights into how hedge fund activism shapes corporate R&D strategies and highlights challenges in achieving sustainable innovation and value enhancement through activist interventions.
期刊介绍：
Research in International Business and Finance (RIBAF) seeks to consolidate its position as a premier scholarly vehicle of academic finance. The Journal publishes high quality, insightful, well-written papers that explore current and new issues in international finance. Papers that foster dialogue, innovation, and intellectual risk-taking in financial studies; as well as shed light on the interaction between finance and broader societal concerns are particularly appreciated. The Journal welcomes submissions that seek to expand the boundaries of academic finance and otherwise challenge the discipline. Papers studying finance using a variety of methodologies; as well as interdisciplinary studies will be considered for publication. Papers that examine topical issues using extensive international data sets are welcome. Single-country studies can also be considered for publication provided that they develop novel methodological and theoretical approaches or fall within the Journal''s priority themes. It is especially important that single-country studies communicate to the reader why the particular chosen country is especially relevant to the issue being investigated. [...] The scope of topics that are most interesting to RIBAF readers include the following: -Financial markets and institutions -Financial practices and sustainability -The impact of national culture on finance -The impact of formal and informal institutions on finance -Privatizations, public financing, and nonprofit issues in finance -Interdisciplinary financial studies -Finance and international development -International financial crises and regulation -Financialization studies -International financial integration and architecture -Behavioral aspects in finance -Consumer finance -Methodologies and conceptualization issues related to finance
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