Seminar (Dept. of General Management)

Theme：Exploiting Diverse Boards：Board Demographic diversity As An Opportunity for Hedge Fund Activism

Speaker：Wei Shi (Associate Professor of Miami Herbert Business School，University of Miami)

Time：2021-05-21 09:30

Address：Zoom Meeting

Language：Chinese/English

Venue：Zoom Meeting https://zoom.com.cn/j/62452566261?pwd=eHNucnBUYU43bm5vMkxaTldJYlBsZz09 

Meeting ID：624 5256 6261

Password：151302

ABSTRACT:

Shareholders are rallying behind the business case for board demographic diversity. In this context, given that activist shareholders tend to target firms with “problems,” one could expect that board demographic diversity will reduce the likelihood a firm is targeted by an activist shareholder. Yet, research on corporate opportunity structures suggests that activists target not only based on problems, but also on opportunities. We contend that board demographic diversity creates opportunities for activist shareholders to influence firms because demographically diverse boards make decisions more slowly and are less unified than more homogenous boards, which are critical disadvantages in shareholder activism campaigns. To test our theory, we hypothesize that activist hedge funds are more likely to target firms with demographically diverse boards and that activist hedge funds are more likely to use this opportunity when firms exhibit problems—such as board invigilance, market underperformance, and a negative reputation—that make those opportunities more valuable. Our analyses of US-based activist hedge fund campaigns between 2010 and 2018 provide support for our hypotheses. We discuss theoretical and practical contributions to corporate governance.