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Investment Banks, Hedge Funds, and Private Equity, 2nd Edition by David Stowell

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13

Shareholder Activism and Impact on Corporations

The material in this chapter should be cross-referenced with these cases: McDonald’s, Wendy’s, and Hedge Funds: Hamburger Hedging? and Porsche, Volkswagen, and CSX: Cars, Trains, and Derivatives.

Certain hedge funds focus on shareholder activism as a core investment strategy. An activist shareholder acquires a minority equity position in a public corporation and then applies pressure on management in order to increase shareholder value through changes in corporate policy. Some of the common changes advocated by activist shareholders include reducing corporate costs, repurchasing common shares, increasing corporate leverage, increasing dividends, reducing CEO compensation, reducing cash balances, ...

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