Hedge Funds versus Private Equity Funds as Shareholder Activists in Germany – Differences in Value Creation

39 Pages Posted: 30 Dec 2013

See all articles by Denis Schweizer

Denis Schweizer

Concordia University

Mark Mietzner

Leipzig University of Applied Sciences - HTWK Leipzig

Date Written: December 28, 2013

Abstract

We investigate the valuation effects of German firms targeted by hedge funds and by private equity investors. We argue that both types of investors differ from other blockholders by their strong motivation and ability to actively engage and reduce agency costs. Consequently, we find positive abnormal returns following a change in ownership structure. However, these effects differ markedly between both investors, as proxy variables for agency costs only explain the market reaction for our private equity subsample. We conclude that private equity funds seem to be more successful at creating shareholder value, which could be due to their longer-term perspective and a higher adaptability to the surrounding corporate governance.

Keywords: Abnormal Returns, Corporate Governance, Hedge Funds, Private Equity, Shareholder Activism

JEL Classification: G14, G32, G34, G38

Suggested Citation

Schweizer, Denis and Mietzner, Mark, Hedge Funds versus Private Equity Funds as Shareholder Activists in Germany – Differences in Value Creation (December 28, 2013). Journal of Economics and Finance, Forthcoming, Available at SSRN: https://ssrn.com/abstract=2372632

Denis Schweizer (Contact Author)

Concordia University ( email )

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HOME PAGE: http://www.concordia.ca/jmsb/faculty/denis-schweizer.html

Mark Mietzner

Leipzig University of Applied Sciences - HTWK Leipzig ( email )

Leipzig
Germany

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