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    Emerging aspects of shareholder activism : a dissertation presented in partial fulfillment of the requirements for the degree of Doctoral of Philosophy in Finance at Massey University, Manawatu (Turitea), New Zealand
    (Massey University, 2021) Hafeez, Bilal
    This thesis consists of one comprehensive literature review and two empirical essays on shareholder activism. The literature review on shareholder activism provides a brief discussion on shareholder activism’s evolution, highlighting the potential of retail investors’ participation in tipping the balance between the activist and the firm. Furthermore, it provides evidence on the activist institutional investors, including the traditional institutional investors such as pension funds and mutual funds, and hedge funds as the latest emerging activists. The literature review identifies some potential for research areas in light of the growing interest in shareholder activism. This thesis further includes two empirical studies on retail investors and activist hedge funds, respectively. The first essay examines retail investors’ attention and participation during shareholder activism with the proliferation of internet from 1990s. This study finds a significant increase in retail investors’ attention before the annual general meetings, leading to a subsequent increase in retail investors’ participation in the voting process, especially among proposals that resonate with retail investors’ preferences. This increase is more pronounced for less transparent firms than transparent firms. Empirical evidence also suggests that retail investors’ attention has a more pronounced increase for proposals with a more controversial tone. Overall, this study provides new insights into information technology’s role in mitigating retail investors’ apathy issues. The second essay focuses on hedge fund activism, and it is the first study to document the impact of hedge fund activism on firm risk-taking behaviors. This study provides evidence that firms targeted by activist hedge funds, which tend to maximize short-term profits, experience a significant reduction in risk-taking in the long-term. This reduction in risk-taking is more pronounced for myopic and opaque firms. This study also provides new evidence on the impact of target’s response on activism outcomes. Management’s hostile resistance would offset the initial effect of activism on target firms. Overall, this study provides important implications that activist hedge funds might not fulfil the role of monitoring as suggested in existing corporate governance literature. The results provide new insights to academics and regulators by adding to the debate on the costs and benefits of activism for the economy.
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    Essays on institutional investors' trading behaviours : a dissertation submitted in fulfilment of the requirements for the degree of Doctor of Philosophy in Finance at Massey University, School of Economics and Finance, Massey University
    (Massey University, 2018) Tang, Tiantian
    This research is the first comprehensive academic endeavour to explore the trading behaviours for both domestic and foreign institutional investors in China, the world largest emerging market, using a unique data set. In 2003, Chinese regulatory authorities established a scheme named Qualified Foreign Institutional Investors (QFIIs), which allows foreign institutional investors to directly trade in “A” shares. Before then, no foreign investors were allowed to do so. According to numerous media reports and anecdotes, QFIIs in China have been much more successful than their Chinese counterparts. These have aroused a great deal of curiosity among academics and practitioners. Thus, it is of great interest to examine the trading activities engaged by both domestic and foreign institutional investors in China. This research embraces three subprojects for three essays respectively. The first essay investigates the preferences and stock characteristics of domestic and foreign institutional holdings in China. The results indicate that they have similar preferences regarding certain stock characteristics, but different preferences when it comes to industry allocations. The results also highlight the differences regarding corporate governance and stock picking patterns. The panel regression suggests that firms with institutional holdings in the previous period perform better in the following period. This phenomenon is stronger for domestic holdings, indicating that domestic institutional investors have an edge in stock picking over foreign institutional investors. This study also finds that ownership concentration plays a positive role in firm performance. The second essay conducts a comprehensive performance evaluation of Chinese mutual funds and style investment. Using a characteristic-based benchmark, results indicate that mutual fund managers have stock picking talents over time, with relative weak ability to time the market. Style investments contribute the most to funds’ gross returns. Active funds exhibit lower style consistency but still realise better net returns compared to their passive counterparts. This essay further suggests that mutual fund managers who concentrate their holdings in certain industries perform better after controlling for common risk factors. The second essay also concludes that Chinese mutual fund managers have the ability to select superior industries. The third essay examines the fund performance by sorting the equity holdings into deciles based on the style consistency and industry concentration. Results suggest that fund managers with consistent investment styles and concentrated industry holdings outperform the others. This positive style-performance relation remains statistically significant after controlling for various fund characteristics. Small funds and growth funds exhibit stronger style effects. Funds investing more in state-owned stocks have inferior returns. The stocks purchased by fund managers perform better than the stocks sold. Similar results are observed for stocks held by the foreign institutional investors (QFIIs). This thesis contributes to the existing literature by examining the trading behaviour of both the domestic institutional and the foreign institutional investors in China. It sheds extra light on issues related to the Qualified Foreign Institutional Investors scheme, which has contributed largely to the reform of the Chinese financial market since 2003. The analysis of the investment styles of institutional investors has important implications for academics, practitioners and, in particular, policy makers, and enables China to further enhance its financial market liberalisation with the rest of the world.
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    Shareholder wealth effects of European takeovers : 1997-2004 : a thesis presented in partial fulfilment of the requirements for the degree of Masters of Business Studies in Finance at Massey University
    (Massey University, 2005) Wales, Ryan
    This study provides an empirical analysis of the returns to acquirers and targets in European mergers and acquisitions. An event study has been carried out to test the announcement effect of a merger on the bidding and target company stock prices over the period. January 1, 1997 to December 31, 2004. for twenty-three markets in Europe. This is the first comprehensive study, the author is aware of, to complete such that includes transactions throughout all of Europe, including Eastern Europe and countries from the former Soviet Union. This thesis tests the hypothesis that the incentive mechanisms created by investor protection rights, along with the strength of legal enforcement across countries, affects the value created and destroyed by managers in domestic and cross-border acquisitions within Europe. Thus, the relative difference in corporate governance rules between nations is a source of value for merged firms in and of itself. Prior studies have found significant variation in the gains to acquiring and bidding firms as a function of the nationality of the bidder, but the ultimate source of this international variation in returns has not been satisfactorily addressed. It is argued that a firm's legal and corporate governance environment provides a partial explanation for the observed variation in returns for domestic and cross-border acquisitions and it is tested across all European countries, something that has not been done before. The results suggest that countries with stronger investor protection rules generate larger returns to target shareholders. The better accounting standards increase disclosure, helping acquirers identify potential targets. This reduces the cost of capital and thus increases the competition among bidders and the premium paid by the winning bid. Similarly, target shareholders in strong investor protection and disclosure regimes also experience a price drift in 30 days leading up to a takeover announcement. The sophistication of legal rules requires substantial legal and financial consultation resulting in leakages in the market. The analysis also looks at the difference between domestic and cross-border transactions, and confirms that targets in cross-border deals generate higher returns, implying that targets benefit from expanding into foreign marketplaces. However, acquirers receive lower benefits in cross-border deals than in national transactions, signalling that acquiring firms are to some extent penalized for engaging in a cross-border merger.