Debtholder responses to shareholder activism: Evidence from hedge fund interventions

Jayanthi Sunder, Shyam V. Sunder*, Wan Wongsunwai

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

34 Scopus citations


We investigate the effect of shareholder activism on debtholders by examining a sample of bank loans for firms targeted by activist hedge funds. We compare loan spreads before and after intervention and show the effects of heterogeneous shareholder actions. Spreads increase when shareholder activism relies on the market for corporate control or financial restructuring. In contrast, spreads decrease when activists address managerial entrenchment. Furthermore, the effects are more pronounced when pre-existing governance mechanisms are weak. Our findings suggest that shareholder activism does not necessarily exacerbate bondholder-shareholder conflicts of interest and highlight the role of activism in aligning investors.

Original languageEnglish (US)
Pages (from-to)3318-3342
Number of pages25
JournalReview of Financial Studies
Issue number11
StatePublished - Nov 1 2014

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics


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