We develop a dual-layered agency model to study blockholder monitoring by activist funds that compete for investor flow. Competition for flow affects the manner in which activist funds govern as blockholders. In particular, funds inflate short-term performance by increasing payouts financed by...

We provide a theoretical framework to study blockholder activism by funds who com- pete for investor ?ow. In our model, activists are intrinsically able to raise the value of target ?rms through monitoring. Competition for investor ?ow induces them to enhance the returns generated by monitoring...

We provide a theoretical model to explain the procyclicality of hedge fund activism. In our model, hedge funds which compete to retain investor flows excessively increase the net leverage of target firms in order to deliver high short-term payouts and signal their ability. Such excessive...