Case Analysis Of Fund Activism

Fund industry has made rapid development in China recent years and now it has been one of the most important institutional investors in the financial market.As early as the 80 s of last century,the United States fund companies have participated in the enterprise governance and strategy-making.There are two incidents that make Chinese people know fund activism.One is the boardroom battle pursuing a hostile takeover of China's largest residential developer.And another one is China Vanke files lawsuit to invalidate ownership rights of majority shareholder Baoneng Group.China's fund industry has been learning fund theoretical knowledge and management methods from the US and other developed countries in the fund industry developing process.Among these methods,the activism is a controversial topic,while we must treat it appropriately in the issue of company governance.There are lots of factors influencing fund company choosing a target company in the process of activism event,such as the size of the company,cash flow,board characteristics,ownership structure,and so on.At the same time,it would have impact on the performance of the target company during the activism.This paper illustrates in four steps.First of all,this article analyzes the impact of institutional investors take activism strategy on corporate performance by studying five domestic and overseas cases.And summarize what measures are taken by institutional investors to achieve activism.Secondly,focusing on the case of CSG A Company and Baoneng Group,I make the financial status comparison between two time periods based on event windows,one is the consisting 10 years before the event window and another is 2 years after that.At the same time do the comparable analysis to the comparable companies.After that we can summarize the selecting factor towards the target company.Also,we can collect data to estimate the cost-benefit for fund company.Thirdly,find the relationship between the performance of public companies and institution holdings by doing empirical analysis.In this paper,use factor analysis to calculate the public company's comprehensive performance index,and then do regression analysis for the company's performance and institutional holdings.It is found that the concentration of ownership to the target company has a positive effect on its performance.Different proportions of the institutional ownership affect the performance of the company differently.When the company's institutional ownership ratio is higher than the mid-value of institutional ownership ratio,institutional holding has a positive effect on company's performance.Finally,going over lessons from western countries such as the United States,I provide some regulatory advices on fund corporate activism.