Time: April 9, 9:45 AM (Beijing Time)
Speaker: Professor Gen Goto, University of Tokyo
Organizer and Moderator:Professor Sang Yop Kang
Sponsored by Forum of Finance, Business, Innovation, and Law (Professor Sang Yop Kang, President Liang Chen, Vice Presidents Tianhang Zhang, Fanbo Sun, and Yanfei Qian).
Bio:
Gen Gotois Professor of Law at the University of Tokyo, Graduate Schools for Law and Politics, in Japan. His main field of research is comparative corporate governance, with recent focus on the role of shareholders in Japanese context. He has visited Harvard Law School as Visiting Scholar at East Asian Legal Studies (2013-2015, 2018), and has taught at National University of Singapore, Faculty of Law (2017, 2019, 2021) and at Radzyner Law School of IDC Herzliya in Israel (2019). After graduating from Faculty of Law at the University of Tokyo in 2003 (LL.B.), Professor Goto had been Assistant Professor at the University of Tokyo (2003-2006), Lecturer (2006-2008) and Associate Professor (2008-2010) at Gakushuin University in Tokyo, and Associate Professor (2010-2019) at the University of Tokyo. His articles in English can be found athttp://ssrn.com/author=608493.
Abstract:
This paper aims to empirically analyze the long-term effect of hedge fund activism in Japan in 2000s. In particular, it investigates changes of ROA and Tobin’s Q of target firms for seven years since activist’s intervention (i.e. acquisition of 5% or more of target’s stocks) by using propensity-score matching. The results are as follows: 1) hedge fund activists in Japan tend to target firms that are profitable (high ROA before intervention) but have few investment opportunities (low Tobin’s Q before intervention) and hold large cash reserves; 2) no statistically significant effect, either positive or negative, was found for all target firms, but 3) there is a statistically significant positive effect on Tobin’s Q of subset of target firms where activists had some sort of positive “outcomes” in response to its , such as increase of payouts or appointment of a fund-nominated outside director. These results suggest that activist interventions in Japan in 2000s had contributed to firm values by tackling the agency cost of free cashflow and do not support the argument that hedge fund activism is detrimental to long-term firm value.
