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Laxman Pai, Opalesque Asia:

Activist campaigns by hedge fund managers ultimately have no effect on investor portfolios as the performance of companies targeted by activists neither suffered nor improved, revealed a study.

According to a new Stanford University study named "long-term economic consequences of hedge fund activist interventions", on the value-weighted basis, average returns for the two years after an activist intervention were not meaningfully different than if there had been no hedge fund activism.

"Prior papers document positive equal-weighted long-term returns and operating performance improvements following activist interventions, and typically conclude that activism is beneficial," said the authors Ed deHaan of the University of Washington, Stanford's David Larcker, and Charles McClure of the University of Chicago.

The study extended prior literature in two ways. "First, we find that equal-weighted long-term returns are driven by the smallest 20% of firms with an average market value of $22 million. The larger 80% of firms experience insignificant negative long-term returns," it said.

On a value-weighted basis, which likely best gauges effects on shareholder wealth and the economy, the study found that pre- to post-activism long-term returns are insignificantly different from zero.

For operating performance, it found that prior results are a manifestation of abnormal trends in pre-activism performance.

"Using an appropriately ma......................

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