Accessibility navigation


Institutional cross-ownership and corporate strategy: the case of mergers and acquisitions

Brooks, C., Chen, Z. and Zeng, Y. (2018) Institutional cross-ownership and corporate strategy: the case of mergers and acquisitions. Journal of Corporate Finance, 48. pp. 187-216. ISSN 0929-1199

[img] Text - Accepted Version
· Restricted to Repository staff only until 16 May 2019.
· Available under License Creative Commons Attribution Non-commercial No Derivatives.

1MB

It is advisable to refer to the publisher's version if you intend to cite from this work. See Guidance on citing.

To link to this item DOI: 10.1016/j.jcorpfin.2017.11.003

Abstract/Summary

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.

Item Type:Article
Refereed:Yes
Divisions:Henley Business School > ICMA Centre
ID Code:73681
Publisher:Elsevier

University Staff: Request a correction | Centaur Editors: Update this record

Page navigation