Using plant-level observations from the U.S. Census Bureau we show that hedge fund activism has a positive long-term effect on the productivity of target firms. A typical target firm improves its production efficiency within two years after activism, and this improvement is concentrated in industries with a high degree of product market competition. By following the evolution of the productivity of plants that were sold post-intervention we also find that efficient capital redeployment is an important channel via which activists create value. Furthermore, we show how the use of Compustat data to measure the performance of targeted firms is likely to lead to a downward bias in estimates of performance since firms that experience greater improvement in performance post-intervention are also more likely to disappear from the Compustat database. Finally, consistent with recent work in asset-pricing linking firm investment decisions and expected returns, we show how changes to target firms’ productivity are also associated with a decline in systemic risk, particularly in competitive industries.