Study Shows Hedge Fund Activism Works

A study dated October 2006 by an NYU Business School group shows that markets generally react favorably to hedge fund activism.

The study found, among other things:

• that over a 61 day period preceding and following the filing of a 13D firms targeted by hedge fund activists had an average abnormal return of 10.3%.
• over 60% of the time the hedge funds are successful in getting the target's management to acquiesque to their demands
• while accounting preformance of the target does not generally improve the activists are able to extract cash from the target for the shareholders by increasing debt capacity and paying higher dividends

The study appears on the Web and makes interesting reading indeed.