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Oxford University Centre for Corporate Reputation

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The value of social connection
12
Dec
2017

Ellen Yazhou He presented her latest paper 'The benefits of friendship in hedge fund activism" at this year's Financial Management Association Annual Meeting in Boston, USA.

The Financial Management Association is a global leader in developing and disseminating knowledge about financial decision making. Part of their mission is to provide opportunities for professional interaction between and among academicians, practitioners and students, and to promote the development and understanding of basic and applied research and of sound financial practices. 

Ellen's paper uses a social network framework to study information dissemination during activist campaigns. Actively managed funds whose managers are socially connected to the lead activist are more likely to increase their ownership in the target firm around the activist disclosure, and the likelihood is higher when the activist has a better track record. Connected institutions also earn significantly higher returns relative to non-connected funds. Connected funds as a whole substantially increase their holdings in the target, and their presence contributes to the activist's campaign success. Additional tests are performed to rule out alternative explanations such as fund manager ability or similarity in portfolio choices. This study contributes to the understanding of alliance building in hedge fund activism.

 

Profiles

Ellen Yazhou He

Ellen Yazhou He View profile

Ellen Y. He is the Eni Research Fellow at the Oxford University Centre for Corporate Reputation.