Common institutional ownership and mergers and acquisitions outcomes

Fan Xia ()
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Fan Xia: Rennes School of Business

Review of Quantitative Finance and Accounting, 2023, vol. 60, issue 4, No 5, 1429-1449

Abstract: Abstract Institutional owners frequently invest in a diversified portfolio of firms to avoid firm-specific risks. I investigate the particular scenario in which the institutional owners have shares in both the acquiring and the acquired target firms of an M&A deal. Using a quasi-experimental approach, I find that the acquirer pays less premium and performs better after the M&A effectiveness when the ratio between the value owned by common institutional shareholders in the acquirer and the value held by the same shareholders in the target firm is higher. The value paid is higher, and the performance worsens when this ratio is lower. The results suggest the common institutional owners can obtain benefits from promoting and implementing such M&A deals as a secondary compensation for their lack of control, usually at the expense of the controlling shareholders.

Keywords: Merger and acquisitions; Institutional owners; Performance; Insider information (search for similar items in EconPapers)
JEL-codes: G34 (search for similar items in EconPapers)
Date: 2023
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DOI: 10.1007/s11156-023-01134-7

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