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Matt Levine

Activists Are Tough on Companies They Don't Own

If it's bad for competitors, does that mean it's good for the target company?

There is a lot of fairly boring back-and-forth debate over hedge fund activism, in which proponents of activism argue that it's good because it improves corporate performance, and opponents of activism argue that it's bad because it provides only short-term boosts but is destructive in the long run. There are studies both ways, each side picks the evidence it likes, and it remains an eternally suspended question that in any case tells you nothing about whether any particular activist proposal is good or bad.

So it is pleasing that two finance professors, Hadiye Aslan and Praveen Kumar, found a new way of measuring activism. Instead of looking at firms that are targeted by activists, they looked at the competitors of those firms, and found that activism is bad for them: