Empirical Research

Question 1

What was the main research question in Brav et al. (2018) on hedge fund activism?

Answer 1

How does hedge fund activism affect corporate innovation?

Question 2

What input and output measures did Brav et al. (2018) use to measure innovation?

Answer 2

Inputs: R&D Expenditures
Outputs: Patent quantity, citations, originality and generality.

Question 3

What happens to R&D expenditures after hedge fund activism, according to Brav et al.?

Answer 3

R&D expenditures decrease by approx. $11 million in absolute terms but remain unchanged relative to assets.

Question 4

How does hedge fund activism affect patent quantity and quality?

Answer 4

Patent quantity increases, and quality improves (higher citations, originality, and generality)

Question 5

What did Brav et al. find about resource reallocation after hedge fund interventions?

Answer 5

Patents are sold to better owners, and inventors who stay become more productive.

Question 6

What is the main conclusion of Brav et al. about hedge fund activism and innovation?

Answer 6

Activism improves innovation output and efficiency, making firms leaner but not weaker.

Question 7

What dataset did Gantchev and Giannetti (2020) analyze for shareholder activism?

Answer 7

4878 shareholder proposals in S&P 1500 firms from 2003-2014.

Question 8

What happens to shareholder proposals submitted by individuals?

Answer 8

They receive more votes but are less likely to pass or be implemented.

Question 9

What market reaction did Gantchev and Giannetti observe for proposals by active individuals?

Answer 9

Negative abnormal returns, indicating concerns about proposal quality.

Question 10

What type of shareholder proposals received positive market reactions?

Answer 10

Proposals by institutional investors and top-10 sponsors.

Question 11

What impact does common ownership have on managerial incentives according to Anton et al. (2020)?

Answer 11

It reduces wealth-performance sensitivity (WPS) in executive compensation.

Question 12

What methodology did Anton et al. use to study the effects of common ownership?

Answer 12

A difference-in-differences analysis exploiting peer firms’ inclusion in the S&P500.

Question 13

What happens to wealth-performance sensitivity (WPS) after sharp increases in common ownership?

Answer 13

WPS decreases significantly, reducing managers’ incentives to compete.

Question 14

What industries were studied to demonstrate common ownership effects on competition?

Answer 14

Airlines and banking

Question 15

What key critique was raised against the common ownership airline results?

Answer 15

Results were driven by passenger volume and top markets rather than common ownership itself.

Question 16

What evidence did Brav et al. provide to confirm that hedge fund interventions caused innovation changes?

Answer 16

Innovation increases were observed right after hedge fund interventions compared to control firms.

Question 17

What happens to inventors’ productivity after hedge fund interventions?

Answer 17

Retained inventors are more productive, and new hires maintain similar productivity.

Question 18

In shareholder activism, what was the unconditional probability of proposals receiving majority support?

Answer 18

Approximately 20%

Question 19

How did Gantchev and Giannetti isolate the impact of shareholder proposals?

Answer 19

By analyzing voting outcomes, proposal implementation, and abnormal stock returns.

Question 20

What alternative explanation do critics offer for anti-competitive effects in common ownership?

Answer 20

Large firms naturally dominate markets, independent of ownership structures.