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INTRODUCTION
The objective of this article is to present an analysis of five cases of companies targeted by activist hedge funds and corporate governance implications. The analysis includes the developments that led an activist hedge fund to target a company for restructuring, investment strategy, proposal made by the hedge fund, response of the target company's management, and effect on the stock price of the target. This research is important as a means of better understanding the final result of such an activist ownership and how it benefits various stakeholders associated with the target company. The qualitative nature of the study generates results that are suited to the general understanding of the complex hedge fund activism contest. Studying five individual cases enhances our understanding of the process that activist hedge funds pursue in bringing about a strategic change in the target companies.
By focusing on the details and events of the activist investment by a hedge fund, this study adds to the contributions of existing literature that empirically documents the impact of hedge fund activism on stock price performance.
Hedge funds have played a significant role in shareholder activism in the United States. Hedge fund activism is an investment strategy that aims to generate large positive abnormal returns for both shareholders in the target companies and those in the activist hedge funds. Klein and Zur (2006) define hedge fund activism as a strategy 'in which a hedge fund purchases a 5 per cent or greater stake in a publicly-traded firm with the stated intent of influencing the firm's policies'. These hedge funds are required to file a Schedule 13D with the SEC within 10 days of acquiring more than a 5 per cent stake. Most of the time, these hedge funds do not hold back information because they want other investors to see the failings of the management of the target company. By using their shareholder voting rights, these funds try to create value for their investors by 'improving' the corporate governance of the target firms, which will lead to greater efficiencies and ultimately over time to a higher share price.
An activist's primary goal is to improve stock price performance of the target firm. However, each manager's approach can be different. Target companies are...