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Alternative Market Briefing

Activist investing stimulate innovation and strength in targeted companies

Monday, November 18, 2019

Laxman Pai, Opalesque Asia:

The third-party activism in corporate governance can increase the longevity and sustainability of a company's innovation, says a new research.

Research from Columbia Business School's Professor Wei Jiang, Arthur F. Burns Professor of Free and Competitive Enterprise finds that these outside shareholders can deliver positive results.

Examining the effects of hedge fund interventions specifically on corporate innovation, Jiang reveals that third-party interventions can increase the longevity and sustainability of a company's innovation - particularly with inventors and inventions.

Hedge fund activism leads to companies using R&D dollars more efficiently, contradicting commonly held beliefs that hedge fund activism focuses companies on unsustainable short-term goals.

Intervention makes the inventors at target firms more productive

During and after intervention, the inventors at target firms are more productive than those at non-target peers in terms of the quantity and quality of the patents they file, the study found.

The study, 'How Does Hedge Fund Activism Reshape Corporate Innovation?', show that intervention promotes shifting human capital to support efficiency, as key innovative personnel are matched or re-matched to their most optimal environment.

Post-intervention, not only do patent counts and citation counts per patent increase, they also concentrate more heavily in areas central to the co......................

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