Do Activists Align with Larger Mutual Funds?

TL;DR

This paper shows that hedge fund activists tailor their campaigns to align with large institutional investors' preferences, leading to higher shareholder engagement and success.

Contribution

It introduces a method to estimate institutional preferences from proxy voting and links this alignment to campaign success.

Findings

Aligned campaigns attract more shareholder votes

Greater correlation increases campaign success

Activists benefit from aligning with large institutions

Abstract

This paper demonstrates that hedge funds tend to design their activist campaigns to align with the preferences and ideologies of institutions holding large stakes in the target company. I estimate these preferences by analyzing the institutions' previous proxy voting behavior. The results reveal that activists benefit from this approach. Campaigns with a stronger positive correlation between the preferences of larger institutions and activist communications attract more shareholder attention, receive more votes, and are more likely to succeed.