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Boards with high diversity attract more hedge fund attacks, says survey

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Companies with higher diversity at board level are more vulnerable to attacks from activist hedge fund investors, according to a report by The Daily Telegraph citing a new study by academics at the Rotterdam School of Management.

Companies with higher diversity at board level are more vulnerable to attacks from activist hedge fund investors, according to a report by The Daily Telegraph citing a new study by academics at the Rotterdam School of Management (RSM).

The study, which examined US hedge fund campaigns over a nine year period, found that boards with more female and ethnic minority directors are more likely to be targeted when their businesses run into issues because they take longer to make decisions and are less unified.

According to RSM’s research, companies with governance issues are almost three times more likely to be targeted by activists if they have highly diverse boards and these businesses are almost four times more likely to face activist campaigns if they experience performance issues.

“While demographically diverse boards are more effective under normal circumstances, diverse boards mean that decision-making is slower and that unity may be lower,” says Dr Emilio Marti, an assistant professor at RSM. “Both benefit activist hedge funds.”

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