Value creation by block acquisitions and the importance of block owner identity

Mark Mietzner and Dirk Schiereck

Finance Research Letters, 2016, vol. 17, issue C, 118-124

Abstract: We examine stock price reactions to minority block purchases in German target companies. Our results document that the formation of new outside blocks leads to significant value creation for target shareholders, the size of the effect depending on the identity of the block acquirer. As blocks by strategic investors or activist sponsors entail significantly higher returns compared to pure financial block acquirers this result can be ascribed to a differentiated support of the monitoring hypothesis of agency theory. We also find a negative relation between target firms’ growth before the acquisition and the value generation by new block owners.

Keywords: Minority block-holding; Block purchases; Block ownership identity; Agency problem (search for similar items in EconPapers)
JEL-codes: G14 G20 G32 G34 (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:17:y:2016:i:c:p:118-124

DOI: 10.1016/j.frl.2016.02.004

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