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The impact of socially conscious hedge funds on the behaviors of portfolio firms
Dissertation   Open access

The impact of socially conscious hedge funds on the behaviors of portfolio firms

Jonghyuk Bae
Doctor of Philosophy (Ph.D.), Drexel University
Jun 2021
DOI:
https://doi.org/10.17918/00000820
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Abstract

Hedge funds Social responsibility of business
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 using textual analysis. I also find that socially conscious funds are associated with improvements in the target firms' corporate governance and financial reporting quality. 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.

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