The Impact of Socially Conscious Hedge Funds on the Behaviors of Portfolio Firms

Ph.D. Candidate Jonghyuk Bae will be defending his dissertation titled, “The Impact of Socially Conscious Hedge Funds on the Behaviors of Portfolio Firms” on 06/22/2021. The time and location is 9:00 am – 11:00 am, ZOOM

Many thanks to Jonghyuk’s dissertation committee: • Committee Chair – Hsihui Chang – Professor – Drexel University • Committee Co-Chair: Xin Dai - Assistant Professor – Drexel University • Committee Member: Tony Curatola - Professor- Drexel University • Committee Member: Barbara Grein - Associate Professor – Drexel University • Committee Member: Rajiv Nag - Clinical Professor – Drexel University

Abstract: This paper examines the impact of hedge funds’ corporate social responsibility (CSR) preferences on the behaviors of their portfolio firms. Despite the growing interest in CSR issues among hedge funds, the question of whether hedge funds’ CSR preferences influence the behaviors of their portfolio firms remains largely unanswered. In this study, I classify hedge funds based on their CSR preferences and find that, compared to funds that are not socially conscious, socially conscious funds are associated with improvements in the target firms’ CSR performance. Further analyses show that socially conscious funds are associated with improvements in the target firms’ corporate governance, financial reporting quality, and operating performance. These findings contribute to the literature on hedge fund activism and are consistent with the notion that socially conscious funds enhance shareholder value for the target firms.