The effects of hedge fund interventions on strategic firm behavior

Inder K. Khurana, Yinghua Li, Wei Wang

Research output: Contribution to journalArticlepeer-review

18 Scopus citations


We examine the impact of hedge fund interventions on target firms' strategic behavior, specifically their voluntary disclosure and earnings management strategies. We find a decrease in both the likelihood and the frequency of management earnings forecasts conveying bad news and an increase in the level of real earnings management following interventions by hedge fund activists. Additional evidence suggests that managers substitute between voluntary disclosure and earnings management strategies in resisting hedge fund attacks. We also find that withholding of bad news is more pronounced when hedge fund activists pose greater threats to the target firm's management and when the intervention lasts for a relatively short time period. Our results are consistent with firms behaving strategically in response to heightened career/reputation concerns and endangered corporate control arising from hedge fund activism.

Original languageEnglish (US)
Pages (from-to)4094-4117
Number of pages24
JournalManagement Science
Issue number9
StatePublished - Sep 2018


  • Earnings management
  • Shareholder activism
  • Strategic behavior
  • Voluntary disclosures

ASJC Scopus subject areas

  • Strategy and Management
  • Management Science and Operations Research


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