Blockholder voting power and investment decisions: Evidence from cross-border deals in Latin America

Carlos Pombo, Cristian Pinto-Gutierrez and Mauricio Jara-Bertín

Journal of Economics and Business, 2024, vol. 131, issue C, No S014861952400047X

Abstract: This paper examines the relationship between blockholder coalitions and the probability of completing a cross-border merger and acquisition. Using different power indices based on Shapley-Shubik values for cooperative games for a sample of acquirers' firms from Latin America, our findings indicate an inverted-U-shaped relationship between the voting power of the largest blockholder and the likelihood of completing a cross-border deal. This relationship is strengthened by the number of active blockholders and the participation of institutional investors within coalitions among the top four blockholders, particularly pension fund administrators. Consequently, we observe that colluding blockholders in acquirer firms are more inclined to pursue risky cross-border acquisitions, but only when they possess relatively low levels of voting rights. Additionally, the study highlights a positive moderating effect of cross-border deals with coalition agreements on the long-term value performance of acquiring firms, suggesting that coalition agreements promote overseas acquisitions that enhance value.

Keywords: Blockholders coalitions; Power indices; Cross-border deals; Institutional ownership; Latin America (search for similar items in EconPapers)
JEL-codes: G32 G34 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jebusi:v:131:y:2024:i:c:s014861952400047x

DOI: 10.1016/j.jeconbus.2024.106205

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