Glass Half Full or Half Empty? Activists, Short Sellers, and Disagreement

51 Pages Posted: 6 Apr 2021 Last revised: 20 Apr 2021

See all articles by Tao Li

Tao Li

University of Florida - Department of Finance, Insurance and Real Estate

Pedro A. C. Saffi

University of Cambridge - Judge Business School

Daheng Yang

Columbia University - Columbia Business School

Date Written: April 6, 2021

Abstract

We study events in which activist hedge funds and short sellers target the same stock, using European data on activism and mandatory disclosures of large short positions. The likelihood of activist targeting and the probability of a successful campaign are higher in the presence of large short sellers, with an even larger effect when investor disagreement is high. However, hedge fund activism does not affect the likelihood of a large short position. Using a calendar-time portfolio approach, we show that hedge fund activism generates higher abnormal returns when large short sellers are present, especially when activists achieve their stated goals.

Keywords: Hedge fund activism, short selling, short position disclosure, disagreement, equity lending

JEL Classification: G12, G14, G15, G2, G34

Suggested Citation

Li, Tao and Saffi, Pedro A. C. and Yang, Daheng, Glass Half Full or Half Empty? Activists, Short Sellers, and Disagreement (April 6, 2021). Available at SSRN: https://ssrn.com/abstract=3820253 or http://dx.doi.org/10.2139/ssrn.3820253

Tao Li (Contact Author)

University of Florida - Department of Finance, Insurance and Real Estate ( email )

Warrington College of Business
Gainesville, FL 32611
United States

HOME PAGE: http://warrington.ufl.edu/contact/profile.asp?WEBID=7628

Pedro A. C. Saffi

University of Cambridge - Judge Business School ( email )

Trumpington Street
Cambridge, CB2 1AG
United Kingdom

HOME PAGE: http://www.pedrosaffi.com

Daheng Yang

Columbia University - Columbia Business School ( email )

3022 Broadway
New York, NY 10027
United States

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