Law and Economics of Hedge Fund Activism

This article has discussed the role of hedge fund activism in corporate governance. Activist hedge funds are an important source of feedback in corporate governance. However, their influence is not always efficient. Although other institutional investors are typically decisive on a hedge fund campaign, their judgment cannot always be trusted.
The optimal decision about whether a company should be managed for the short or the long term depends on the circumstances faced by the individual company. Therefore, individual companies should be able to tailor the exposure to hedge fund activism to their needs, and to alter this choice over time, for instance by way of loyalty or dualclass shares.