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BlueSky Education

Activist hedge fund campaigns have a greater chance of success if activists adopt a confident tone in their letters to a target firm’s management and board of directors, new research reveals.

Professor Dr. Matthias Brauer, Chair for Strategic and International Management at University of Mannheim Business School, and former Research Associate Dr. Philipp Binder collaborated with Prof. Margarethe Wiersema from the University of California Irvine to study how and why activist investors can persuade management and the board to accede to their demands despite holding only a small ownership stake.

The researchers drew on data from Thomson Reuters ASSET4 ESG, which provides detailed information on activist investors, their targets, and campaigns. They studied 1,683 hedge fund campaigns that targeted US companies between 2007-2019.

Crucially, they say activists projecting confidence are effective at countering uncertainty or ambiguity about whether their demands will lead to greater shareholder value.

“Management and the board are able to form impressions about the activist and the merit of their demands in private negotiations, but the firm’s other shareholders possess little information by which to assess activist competence. As a consequence, other shareholders tend to rely on the confidence heuristic, taking an activist’s confidence in tone as a cue for activist’s knowledge and competence,” says Professor Dr. Matthias Brauer.

Their article, “’Dear CEO and Board:’ How Activist Investors’ Confidence in Tone Influences Campaign Success,” appeared in Organizational Science, one of the top management journals.


For more information, or to hear from Professor Dr. Matthias Brauer, contact Jamie Hose at BlueSky Education on, or call +44 (0)1582 790 706.

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