Institutional Monitoring, Coordination and Acquisition Decision in Chinese Public Listed Companies

Fei Peng, Lili Kang and Xiaocong Yang ()

MPRA Paper from University Library of Munich, Germany

Abstract: This paper endeavors to explore the roles that institutional investors play in acquisition decision of Chinese Public Listed Companies (PLCs). Acquisition decision is assumed as a cost-benefit analysis process of shareholders as strategic alliances. Using micro data in the Chinese stock market during 2003-2008, we find that institutional investors including Qualified Foreign Institutional Investors (QFII), Social Security Funds (SSF), Security Firms (SF) and Security Investment Funds (SIF), as well as tradable share (TS) concentration affect a PLC’s acquisition likelihood rather than its annual acquisition size. SSF, SIF and TS concentration can increase acquisition likelihood while QFII decrease it. This paper suggests a strategic alliance model in which institutional investors choose whether to coordinate with controlling shareholder and management. Our paper contributes to the published literature in three ways. First, we offer a conceptual framework to understand the coordination process of acquisition decision in China. Second, we identify which institutional investors could benefit from their monitoring on corporate acquisition through better post-acquisition performance and which could not. Third, we investigate whether institutional investors effectively monitor acquisiton decision or just pick cherry.

Keywords: Corporate Governance; Institutional Monitoring; Acquisition Decision; Coordination (search for similar items in EconPapers)
JEL-codes: G23 G34 P11 (search for similar items in EconPapers)
Date: 2014-06
New Economics Papers: this item is included in nep-cfn and nep-cna
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