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.


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


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
Divisions:Henley Business School > ICMA Centre
ID Code:73681

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

Page navigation