Cross-Ownership, Returns and Voting in Mergers
Stanford Graduate School of Business
University of Chicago - Booth School of Business
January 1, 2006
Stanford Graduate School of Business Research Paper No. 1921
We show that institutional shareholders of acquiring companies on average do not lose money around public merger announcements, because they also hold substantial stakes in the targets and make up for the losses from the former with the gains from the latter. Depending on their holdings in the target, acquirer shareholders may realize different returns from the same merger, some losing money and others gaining. Using a novel dataset we show that this conflict of interests is reflected in the mutual fund voting behavior: in mergers with negative acquirer announcement returns, cross-owners are more likely to vote for the merger.
Keywords: mergers and acquisitions
JEL Classification: G34, G20
Date posted: January 24, 2006 ; Last revised: January 12, 2012
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