High governance funds find success in low governance stocks
Assumption that hedge fund managers outperform by investing in firms with similar corporate governance characteristics to their own is inverted. High governance funds are more successful in selecting low governance stocks
In the context of hedge funds, research tends to link promotion of corporate governance with an activist investment style; activist funds improve board structures and the performance measures of an enterprise, thereby achieving better performance themselves.
Recent research shows why hedge funds may select stocks to invest in based on corporate governance standards. There are several alternative hypotheses for why hedge funds might base their stock selection process on corporate governance (see
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