Comments on Hedge Fund Activism Corporate Governance and

Comments on: Hedge Fund Activism, Corporate Governance, and Firm Performance Dr. Joseph R. Mason Drexel University, The Wharton School, and Federal Deposit Insurance Corporation

Overall Objective of Paper o Define HF Activism o Identify HF Selections o Measure HF Effects

Define HF Activism: Wide Variety of HF Strategies o Fundamental Underlying o Information o Capital

Define HF Activism: Wide Variety of HF Strategies o Fundamental Underlying o Information o Capital

Define HF Activism: Wide Variety of HF Strategies o Fundamental Underlying o Information o Capital

Define HF Activism: Wide Variety of HF Strategies o Fundamental Underlying o Information Regulatory Arbitrage o Capital

Regulatory Arbitrage: Hedge Fund Voting Is this activism by BJPT definition?

Identifying HF Selections o Selection is partially the firm, but also the level of activism. Category 1, “Communicate with board/management…” p Category 7, HF “intends to take full control…” p o Many ways to econometrically differentiate levels of activism. p GIM 2003 QJE o Selection bias (with truncation): Only see those that HF invest in beyond threshold. o Partial observability bias: Don’t see rejected investment opportunities.

Measure HF Effects: Other Tests o Post-“activism” operating performance. o Performance of HF pursuing “activist” agendas. o All models estimated on basis of predicted “activism level” and Heckman methods

Overall Objective of Paper Estimate with care: Results fascinating! Identify HF Selections o Define HF Activism p Think hard about def’n of activism o Think hard about distinctions between objectives p Think hard about selection-obervability-act, level. p o Measure HF Effects p Formal selection model