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We study whether fund managers' industry experience is an important source of value creation in hedge fund activism. We find that the targets of industry-expert fund managers realize higher activism announcement returns and better operating performance, particularly when fund managers' industry expertise is more valuable for targets. These targets also engage in more focused acquisition and divestiture activities in industries where fund managers have experience, allocate more employees to these industries, and cut investments more in the postacquisition period. The superior performance of targets of industry-expert fund managers is robust to controlling for the endogeneity concern and the attrition bias. KEYWORDS acquisition, announcement return, hedge fund activism, hedge fund manager, industry experience, operating performance, target, 1 INTRODUCTION The literature shows that targets of hedge fund activism realize positive and significant abnormal returns around Schedule 13D filings. However, the source of this value gain in hedge [...]

A beneficial tax-timing option may arise from the issuance of long-term debt in an environment marked by fluctuating interest rates. The lowering of bond prices below original purchase price due to rising interest rates provides an opportunity for long-term debt holders to minimize their personal tax liabilities by realizing capital losses immediately after the collapse of bond prices. When bond prices increase due to falling interest rates, bond holders can obtain tax benefits by deferring recognition of capital gains. A company's debt capacity may also be improved by the tax-timing options of long-term debt financing.