Shareholders at the Gate? Institutional Investors and Cross-Border Mergers and Acquisitions
Miguel A. Ferreira
Nova School of Business and Economics; European Corporate Governance Institute (ECGI)
INSEAD - Finance
Pedro P. Matos
University of Virginia - Darden School of Business; European Corporate Governance Institute (ECGI)
June 25, 2009
Review of Financial Studies, Forthcoming
Marshall School of Business Working Paper No. FBE 28-09
We study the role of institutional investors in cross-border mergers and acquisitions (M&As). We find that foreign institutional ownership is positively associated with the intensity of cross-border M&A activity worldwide. Foreign institutional ownership increases the probability that a merger deal is cross-border, successful, and the bidder takes full control of the target firm. This relation is stronger in countries with weaker legal institutions and in less developed markets, suggesting some substitutability between local governance and foreign institutional investors. The results are consistent with the hypothesis that foreign institutional investors act as facilitators in the international market for corporate control; they build bridges between firms and reduce transaction costs and information asymmetry between bidder and target. We conclude that cross-border portfolio investments of institutional money managers and cross-border M&As are complements in promoting financial integration worldwide.
Number of Pages in PDF File: 60
Keywords: Institutional investors, Mergers and acquisitions, Financial integration
JEL Classification: G12, G23, G34Accepted Paper Series
Date posted: July 1, 2009 ; Last revised: September 9, 2009
© 2013 Social Science Electronic Publishing, Inc. All Rights Reserved.
This page was processed by apollo6 in 9.922 seconds