Hedge fund activism has become an integral part of publicly traded firms, and our paper adopts a behavioral lens to examine how the hostility of tactics employed by activist hedge funds may influence the response of target firms. Drawing on cognitive mechanisms and insights from interviews with investment professionals, we propose that activists’ use of hostile tactics may paradoxically trigger greater resistance from target firms. Specifically, we argue that management and the board may seek greater desire for control, and experience ego threat and heightened anxiety in the face of hostility, which increases target firm resistance. Using a sample of 731 activist hedge fund campaigns from 2002 to 2015, we find that target firms are more likely to resist when the activist hedge fund uses more hostile tactics. Further, our findings indicate that resistance towards hostile tactics increases when activist demands challenge the position of management or the board, but is mitigated by a firm’s prior activism experience or boards with more directors that have experienced hostile campaigns.

中文翻译：

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敢于战斗？激进对冲基金的敌对策略如何影响目标公司的抵抗


对冲基金激进主义已成为上市公司不可或缺的一部分，我们的论文采用行为视角来研究激进对冲基金所采用的策略的敌意如何影响目标公司的反应。借鉴认知机制和对投资专业人士访谈的见解，我们提出活动人士使用敌对策略可能会自相矛盾地引发目标公司更大的抵抗。具体来说，我们认为管理层和董事会可能会寻求更大的控制欲，并在面对敌意时体验到自我威胁和高度焦虑，这会增加目标公司的抵制。使用 2002 年至 2015 年的 731 次激进对冲基金活动的样本，我们发现当激进对冲基金使用更多敌对策略时，目标公司更有可能抵制。此外，我们的研究结果表明，当激进主义要求挑战管理层或董事会的立场时，对敌对策略的抵制会增加，但公司之前的激进主义经验或董事会有更多董事经历过敌对活动，这种抵制会有所缓解。