Table 5 PSM and difference-in-difference...

Table 5

PSM and difference-in-difference estimation

Panel A: Probit regression to match hedge fund activism firms with control firms
	(1)
	Probit (hedge fund intervention)
ROA _t−1	−0.328 (−1.565)
Leverage _t−1	−0.222 (−1.172)
Size_t−1	−0.100*** (−2.644)
Tobin Q _t−1	−0.055* (−1.682)
Sales growth _t−1	−0.000 (−0.011)
Payout yield _t−1	−0.020 (−0.018)
R&D _t−1	−0.264 (−0.710)
Institution _t−1	0.697*** (4.319)
Analyst following _t−1	−0.006 (−0.691)
Segment HHI _t−1	−0.014 (−0.050)
Tangibility ratio _t−1	0.200** (2.037)
Constant	−1.790*** (−8.037)
Adjusted R²	0.033
Industry- and year-fixed effects	Yes
Observations	20,060
Note(s): This panel reports the results of a probit regression used to estimate the propensity that a firm will be targeted by an activist hedge fund. The model and control variables are comparable to those used by Brav et al. (2008a, b), where various covariants explaining the propensity of hedge fund activist interventions are determined. We use these results to match targeted firms to non-targeted firms by utilizing an estimated PSM procedure

Panel A: Probit regression to match hedge fund activism firms with control firms
	(1)
	Probit (hedge fund intervention)
ROA _t−1	−0.328 (−1.565)
Leverage _t−1	−0.222 (−1.172)
Size_t−1	−0.100*** (−2.644)
Tobin Q _t−1	−0.055* (−1.682)
Sales growth _t−1	−0.000 (−0.011)
Payout yield _t−1	−0.020 (−0.018)
R&D _t−1	−0.264 (−0.710)
Institution _t−1	0.697*** (4.319)
Analyst following _t−1	−0.006 (−0.691)
Segment HHI _t−1	−0.014 (−0.050)
Tangibility ratio _t−1	0.200** (2.037)
Constant	−1.790*** (−8.037)
Adjusted R²	0.033
Industry- and year-fixed effects	Yes
Observations	20,060
Note(s): This panel reports the results of a probit regression used to estimate the propensity that a firm will be targeted by an activist hedge fund. The model and control variables are comparable to those used by Brav et al. (2008a, b), where various covariants explaining the propensity of hedge fund activist interventions are determined. We use these results to match targeted firms to non-targeted firms by utilizing an estimated PSM procedure

Panel B: Differences in firm fundamentals between treatment and control firms
Variable	Treatment	Control	Difference	T value
ROA _t−1	−0.002	0.018	−0.020	−0.870
Leverage _t−1	0.167	0.168	−0.002	−0.060
Size_t+1	5.988	6.316	−0.329	−1.740*
Tobin Q _t−1	1.629	1.786	−0.157	−1.120
Sales growth _t−1	0.240	0.068	0.172	1.030
Payout yield _t−1	0.012	0.007	0.005	1.540
R&D _t−1	0.064	0.067	−0.003	−0.240
Institution _t−1	0.713	0.745	−0.032	−1.020
Analyst following _t−1	6.276	7.158	−0.882	−1.180
Segment HHI _t−1	0.337	0.379	−0.042	−1.630
Tangibility ratio _t−1	0.514	0.434	0.080	1.790*
Note(s): Panel B tabulates the differences in characteristics between firms that are targeted by hedge fund activists (treatment firms) and nontargeted firms (control firms) that are matched using propensity scores based on the Probit model in Panel A. For each treatment firm year, we find three matched control firms

Panel B: Differences in firm fundamentals between treatment and control firms
Variable	Treatment	Control	Difference	T value
ROA _t−1	−0.002	0.018	−0.020	−0.870
Leverage _t−1	0.167	0.168	−0.002	−0.060
Size_t+1	5.988	6.316	−0.329	−1.740*
Tobin Q _t−1	1.629	1.786	−0.157	−1.120
Sales growth _t−1	0.240	0.068	0.172	1.030
Payout yield _t−1	0.012	0.007	0.005	1.540
R&D _t−1	0.064	0.067	−0.003	−0.240
Institution _t−1	0.713	0.745	−0.032	−1.020
Analyst following _t−1	6.276	7.158	−0.882	−1.180
Segment HHI _t−1	0.337	0.379	−0.042	−1.630
Tangibility ratio _t−1	0.514	0.434	0.080	1.790*
Note(s): Panel B tabulates the differences in characteristics between firms that are targeted by hedge fund activists (treatment firms) and nontargeted firms (control firms) that are matched using propensity scores based on the Probit model in Panel A. For each treatment firm year, we find three matched control firms

Panel C: Differences in changes in internal control weaknesses between targeted and control firms
Variable	Treatment	Control	Difference	T value
Change ICW_t−1,t+1	0.034	−0.045	0.079	2.280**
Change ICW_t+1,t+4	−0.054	0.011	−0.065	−3.050***

Panel C: Differences in changes in internal control weaknesses between targeted and control firms
Variable	Treatment	Control	Difference	T value
Change ICW_t−1,t+1	0.034	−0.045	0.079	2.280**
Change ICW_t+1,t+4	−0.054	0.011	−0.065	−3.050***

Note(s): Panel C tabulates the differences in reported internal control weaknesses between firms that are targeted by hedge fund activists (treatment firms) and nontargeted firms (control firms) that are matched using propensity scores based on the Probit model in Panel A. For each treatment firm year, we find three matched control firms. The variables under comparison are the change in internal control weaknesses from t−1 to t+1 and change from t+1 to t+4, where t is the year of the activism event

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