Selection and institutional shareholder activism in Chinese acquisitions

Fei Peng, Lili Kang and Jun Jiang

MPRA Paper from University Library of Munich, Germany

Abstract: This paper aims to investigate the role that institutional shareholders play in acquisition decision using micro data in the Chinese stock market during 2003-2008. Acquisition decision is the selection and coordination process of shareholders as strategic alliances, which is determined by corporate acquisition ability, composition of institutional shareholders and concentration of tradable share (TS) in China. We use Heckman selection model to surmount the selection biases in acquisition decision. We find that institutional shareholders including qualified foreign institutional investors (QFII), social security funds (SSF), security firms (SF) and security investment funds (SIF), as well as TS concentration affect acquisition probability rather than annual acquisition scale. SSF, SIF and TS concentration can increase acquisition probability while QFII decreases it. Our paper contributes to the published literature in three ways. First, we offer a model to understand the selection and coordination process of acquisition decision. Second, we investigate whether institutional shareholders could effectively monitor annual acquisition scale. Third, we identify Heckman selection problem that institutional shareholders could affect PLCs’ acquisition decision on whether to acquire rather than how much to acquire.

Keywords: Selection; Institutional Shareholders; Acquisition Decision (search for similar items in EconPapers)
JEL-codes: C52 G32 G34 P41 (search for similar items in EconPapers)
Date: 2011-12
New Economics Papers: this item is included in nep-tra
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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