Abstract

Building on the literature reporting on the effectiveness of hedge fund activism to create value for shareholders, this thesis investigates the effect of hedge fund activists on the targeted firm's downside risk. We conduct our analysis on a sample of hedge fund activism ownership data from 1994 to 2015 provided by Alon Brav, which we compare to a matched sample of similar non-targeted firms that we constructed. We find statistical evidence that supports the hypothesis that hedge fund activism reduces the downside risk of the target firm, and that they are more likely to target firms exhibiting higher level of downside risk.