Takeover threats, institutional ownership, and investment efficiency

Yolanda Yulong Wang () and Long Yi ()
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Yolanda Yulong Wang: SAFTI - Shenzhen Audencia Financial Technology Institute
Long Yi: SAFTI - Shenzhen Audencia Financial Technology Institute

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Abstract: We provide a novel framework to understand the complementary role between takeover threats and institutional ownership in ensuring high investment efficiency: institutional investors produce information which alleviates the negative impact of takeover threats while takeover threats empower institutional investors. Utilizing exogenous variations of takeover threats, we find consistent evidence with the model. The complementary relation is stronger for firms in industries that emphasize short-term earnings. Additional tests reveal the findings are unlikely the result of selection. As a result of the complementary relation, antitakeover provisions are detrimental to investment efficiency when institutional ownership is high.

Keywords: Investment efficiency; Institutional ownership; Corporate governance; Takeover threat (search for similar items in EconPapers)
Date: 2025-09
Note: View the original document on HAL open archive server: https://hal.science/hal-05143757v1
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Published in International Review of Economics and Finance, 2025, 102, pp.104213. ⟨10.1016/j.iref.2025.104213⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-05143757

DOI: 10.1016/j.iref.2025.104213

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