Activist hedge funds and their target companies have been known to wage long, expensive proxy battles over board seats. But the directors nominated by activist investors may not actually have much of an impact, according to a study from researchers at Iona College and Sacred Heart University.
In an analysis of 1,874 activist directors serving on public company boards between 1994 and 2017, researchers Thomas Kushner and Khawaja Mamun found “scant statistically significant evidence” that directors nominated by activist hedge funds “generate long-term value for shareholders in the form of superior operating performance and outsized monthly returns during their board tenure.”
The study included 870 companies that were targeted by activist hedge funds, and focused on directors appointed in consultation with activist investors, as well as those who won board seats through proxy contests. The latter path, the researchers noted, can be “extensive and expensive,” like the high