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Institutional cross-ownership and corporate strategy: the case of mergers and acquisitions Article Accepted Version Creative Commons: Attribution-Noncommercial-No Derivative Works 4.0 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 doi:  Available at  It is advisable to refer to the publisher’s version if you intend to cite from the work.  See Guidance on citing .To link to this article DOI:  Publisher: Elsevier All outputs in CentAUR are protected by Intellectual Property Rights law, including copyright law. Copyright and IPR is retained by the creators or other copyright holders. Terms and conditions for use of this material are defined in the End User Agreement   
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Institutional Cross-ownership and Corporate Strategy:The Case of Mergers and Acquisitions*Chris Brooks1, Zhong Chen2and Yeqin Zeng11ICMA Centre, Henley Business School, University of Reading, Reading RG6 6BA, United Kingdom2King’s Business School, King’s College London, London WC2B 4BG, United KingdomAbstractThis article provides new evidence on the important role of institutional investorsin affecting corporate strategy. Institutional cross-ownership between two firms not onlyincreases the probability of them merging, but also affects the outcomes of mergers and ac-quisitions (M&As). Institutional cross-ownership reduces deal premiums, increases stockpayment in M&A transactions, and lowers the completion probabilities of deals with neg-ative acquirer announcement returns.Furthermore, deals with high institutional cross-ownership have lower transaction costs and disclose more transparent financial statementinformation. 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-transientcross-owners. Our findings are robust after mitigating the cross-ownership asymmetry con-cern. 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.Keywords: Institutional Investors; Cross-ownership; Mergers and Acquisitions (M&As)JEL classifications: G23; G30; G34;*We would like to thank Jeffry Netter (the Editor) ad an anonymous referee of this journal, Alex Edmans,Anup Srivastava, Chris Florakis, Eliezer Fich, Guanming He, Ian Tonks, Kevin Mullally, Marc Lipson, NaciyeSekerci, and Raghu Rau for their helpful comments. We would also like to thank seminar participants at theICMA Centre (Henley Business School), University of Liverpool Management School, Wuhan University, Jinan

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