We examine the impact of hedge fund activism on investment efficiency in target firms. On average, targets’ investment efficiency improves after experiencing hedge fund activism. However, activism improves investment efficiency only for overinvested target firms by reducing their propensity to...

"We investigate the leverage of hedge funds in the time series and cross section. Hedge fund leverage is counter-cyclical to the leverage of listed financial intermediaries and decreases prior to the start of the financial crisis in mid-2007. Hedge fund leverage is lowest in early 2009 when the...