The Role of Family Firm Status in Target Firm Response to Hedge Fund activism: the Socioemotional Wealth Perspective

Hedge fund activism has emerged as a key external form of corporate governance mechanism. While socio-emotional wealth theory suggests that the decision-making process of family firms places emphasis on non-financial wealth within the founding family, the mechanism through how family vs. non-family firms may alter their behavior towards activist hedge funds is relatively unknown. Through an examination of activist campaigns from 2003 to 2022 experienced by firms in the S&P 1500 index, we attempt to explore how the family firm status may influence the response of target firm when the firm is targeted by an activist hedge fund.