Chris Brooks
Institutional cross-ownership and corporate strategy: The case of mergers and acquisitions
Brooks, Chris; Chen, Zhong; Zeng, Yeqin
Abstract
This article provides new evidence on the important role of institutional investors in affecting corporate strategy. Institutional cross-ownership between two firms not only increases the probability of them merging, but also affects the outcomes of mergers and acquisitions (M&As). Institutional cross-ownership reduces deal premiums, increases stock payment in M&A transactions, and lowers the completion probabilities of deals with negative acquirer announcement returns. Furthermore, deals with high institutional cross-ownership have lower transaction costs and disclose more transparent financial statement information. The effect of cross-ownership on the total deal synergies and post-deal long-term performance is positive, which can be attributed to independent and non-transient cross-owners. Our findings are robust after mitigating the cross-ownership asymmetry concern. Overall, our results suggest that the growth of institutional cross-holdings in U.S. stock markets may greatly change corporate strategies and decision-making processes.
Citation
Brooks, C., Chen, Z., & Zeng, Y. (2018). Institutional cross-ownership and corporate strategy: The case of mergers and acquisitions. Journal of Corporate Finance, 48, 187-216. https://doi.org/10.1016/j.jcorpfin.2017.11.003
Journal Article Type | Article |
---|---|
Acceptance Date | Nov 9, 2017 |
Online Publication Date | Nov 15, 2017 |
Publication Date | Feb 1, 2018 |
Deposit Date | Sep 21, 2018 |
Publicly Available Date | Sep 26, 2018 |
Journal | Journal of Corporate Finance |
Print ISSN | 0929-1199 |
Publisher | Elsevier |
Peer Reviewed | Peer Reviewed |
Volume | 48 |
Pages | 187-216 |
DOI | https://doi.org/10.1016/j.jcorpfin.2017.11.003 |
Public URL | https://durham-repository.worktribe.com/output/1318580 |
Related Public URLs | http://centaur.reading.ac.uk/73681/ |
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http://creativecommons.org/licenses/by-nc-nd/4.0/
Copyright Statement
© 2017 This manuscript version is made available under the CC-BY-NC-ND 4.0 license http://creativecommons.org/licenses/by-nc-nd/4.0/
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