Cross-ownership, returns, and voting in mergers

We show that institutional shareholders of acquiring companies on average do not lose money around public merger announcements, because they hold substantial stakes in the targets and make up for the losses from the acquirers with the gains from the targets. Depending on their holdings in the target...

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Bibliographic Details
Published in:Journal of financial economics 2008-09, Vol.89 (3), p.391-403
Main Authors: Matvos, Gregor, Ostrovsky, Michael
Format: Article
Language:English
Subjects:
Acquisitions
Acquisitions & mergers
Bidder returns
Bidding
Conflicts of interest
Financial information
Investment trusts
Mergers
Mergers and acquisitions
Mergers and acquisitions Bidder returns Proxy voting
Mutual funds
Ownership
Proxy voting
Rates of return
Shareholder voting
Stockholders
Studies
Target company
Voting behaviour
Citations: Items that cite this one
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Summary:We show that institutional shareholders of acquiring companies on average do not lose money around public merger announcements, because they hold substantial stakes in the targets and make up for the losses from the acquirers with the gains from the targets. Depending on their holdings in the target, acquirer shareholders generally realize different returns from the same merger, some losing money and others gaining. This conflict of interest is reflected in the mutual fund voting behavior: In mergers with negative acquirer announcement returns, cross-owners are significantly more likely to vote for the merger.
ISSN:0304-405X
1879-2774
DOI:10.1016/j.jfineco.2007.11.004