S-Space College of Business Administration/Business School (경영대학/대학원) Dept. of Business Administration (경영학과) Theses (Ph.D. / Sc.D._경영학과)
Essays on Institutional Investors and Securities Class Actions : 기관투자자와 주주집단소송에 관한 연구
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- 서울대학교 대학원
- institutional investors ; securities class actions ; agency conflicts ; financial reporting quality ; portfolio adjustment ; hedge funds ; activists ; shareholder activism ; voice ; exit ; corporate governance ; investor learning ; 기관투자자 ; 주주집단소송 ; 대리인 문제 ; 재무보고품질 ; 투자포트폴리오의 조정 ; 헷지펀드 ; 행동주의 투자자 ; 주주행동주의 ; 영향력 행사 전략 ; 탈출 전략 ; 기업지배구조 ; 투자자 학습
- 학위논문 (박사) -- 서울대학교 대학원 : 경영대학 경영학과, 2021. 2. 최종학.
- This dissertation is comprised of two essays on institutional investors and securities class actions. The first essay, entitled “Institutional Investors’ Portfolio Adjustment after Shareholder Litigation,” examines how institutional investors change their investment behavior toward non-litigated investees after experiencing litigation. Prior studies report that institutional investors play a key role in securities class actions by monitoring the court process, inducing favorable litigation outcomes for plaintiffs and improving governance in the litigated firms. I extend the prior studies by focusing on changes in the investment strategy of institutional investors after litigation. Using a sample of 102,234 institution-quarter observations in the U.S. over the 2006–2017 period, I document the following. First, institutional investors tilt their portfolios toward investees with higher financial reporting quality after experiencing litigation. Their portfolio adjustments following litigation are interpreted as an attempt to reduce ex ante litigation risk at the portfolio level. Second, the portfolio adjustments are less pronounced when institutional investors have a shorter investment horizon or when they stronger incentive to directly monitor investees’ agency conflicts. These results suggest that the portfolio adjustments based on financial reporting quality are less important when institutional investors heavily rely on private information in their short-term trading or when they benefit more from direct monitoring. Overall, this study provides evidence of the externalities of securities class actions in an investor’s portfolio and deepens the understanding of the economic consequences of securities class actions.
The second essay, entitled “One Leaves, Another Arrives: The Behavior of Hedge Funds around Shareholder Litigation,” investigates the behavior of hedge funds around shareholder litigation, focusing on their activist and trading strategies. Despite their key role in promoting effective governance, hedge funds have been discredited in the litigation setting. I attempt to reconcile this discrepancy by examining the economic decisions of hedge funds in the face of shareholder litigation. Using extensive U.S. data on securities class actions and hedge funds’ Schedule 13D filings during the 2001–2019 period, I document the following. Sued firms are more likely than control firms to be subject to hedge fund intervention following litigation. Compared with sued firms without such intervention, sued firms targeted by hedge funds improve their corporate governance and performance more significantly after litigation, consistent with hedge funds influencing the corporate actions of sued firms via voice. Further analysis reveals that such intervention is primarily driven by hedge funds that initiate their investments in a sued firm after litigation, but not by those that already held stakes in the sued firm before litigation. Hedge funds who held shares of the sued firm before litigation are more likely than other types of institutional investors to preemptively dispose of their stakes in the sued firm before litigation begins. This evidence is consistent with informed hedge funds deploying an exit strategy to deal with agency conflicts. Finally, hedge funds with more litigation experience are more likely to intervene in the management of other non-litigated firms in their investment portfolios. I interpret this result as evidence of the externalities of litigation on the behavior of hedge funds. In summary, this study provides a comprehensive understanding of the voice and exit strategies that hedge funds undertake around shareholder litigation.