Hedge fund activism frequently has severe consequences for target firms and their management and boards. Yet, we know little about target management and boards’ response to activist attacks. To advance our understanding in this respect, we examine how the style of target management and boards’ written communication with activists influences campaign outcomes. Building on the behavioral mimicry perspective, we propose that language style matching (LSM) and emotional tone mimicry (ETM), which constitute two distinct types of verbal mimicry, are important communication style characteristics of target management and boards’ response letters that can induce activist demand withdrawal. Though LSM and ETM are reflective of different modes of conflict behavior, we further reason based on conflict management research that ETM in conjunction with LSM is particularly effective in inducing activist demand withdrawal. The positive effects of ETM in conjunction with LSM, however, are expected to fade with increasing length of target management and boards’ written response. Results of an empirical analysis of the public communication between activists and target management and boards in 150 U.S. activist hedge fund campaigns between 2002 and 2019 support these predictions. Our study extends research on financial activism by offering a novel theoretical explanation as to why and how target management and boards can avert activist demands. Further, we contribute to behavioral mimicry research by examining the individual and joint effectiveness of distinct types of verbal mimicry in the hostile context of activist hedge fund campaigns.

中文翻译：

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言语模仿在激进对冲基金活动中的有效性


对冲基金的激进主义经常给目标公司及其管理层和董事会带来严重后果。然而，我们对目标管理和董事会对激进分子攻击的反应知之甚少。为了加深我们在这方面的理解，我们研究了目标管理的风格以及董事会与积极分子的书面沟通如何影响竞选结果。基于行为模仿的视角，我们提出语言风格匹配（LSM）和情绪语气模仿（ETM）构成了两种不同类型的言语模仿，是目标管理层和董事会回复信的重要沟通风格特征，可以诱导积极分子要求撤回。尽管 LSM 和 ETM 反映了不同的冲突行为模式，但我们根据冲突管理研究进一步推断，ETM 与 LSM 结合使用在诱导积极分子撤回需求方面特别有效。然而，随着目标管理和董事会书面回应时间的增加，ETM 与 LSM 结合的积极影响预计会减弱。对 2002 年至 2019 年间 150 个美国激进对冲基金活动中的激进分子与目标管理层和董事会之间的公共沟通进行的实证分析结果支持了这些预测。我们的研究通过提供一种新颖的理论解释来扩展对金融激进主义的研究，解释目标管理层和董事会为何以及如何避免激进主义的要求。此外，我们通过检查激进对冲基金活动的敌对环境中不同类型的言语模仿的个体和联合有效性，为行为模仿研究做出了贡献。