Shareholders at the Gate? Institutional Investors and Cross-Border Mergers and Acquisitions

Review of Financial Studies, Forthcoming

Marshall School of Business Working Paper No. FBE 28-09

60 Pages Posted: 1 Jul 2009 Last revised: 9 Sep 2009

See all articles by Miguel A. Ferreira

Miguel A. Ferreira

Nova School of Business and Economics; European Corporate Governance Institute (ECGI); Centre for Economic Policy Research (CEPR)

Massimo Massa

INSEAD - Finance

Pedro Matos

University of Virginia - Darden School of Business; European Corporate Governance Institute (ECGI)

Multiple version iconThere are 3 versions of this paper

Date Written: June 25, 2009

Abstract

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.

Keywords: Institutional investors, Mergers and acquisitions, Financial integration

JEL Classification: G12, G23, G34

Suggested Citation

Ferreira, Miguel Almeida and Massa, Massimo and Matos, Pedro, Shareholders at the Gate? Institutional Investors and Cross-Border Mergers and Acquisitions (June 25, 2009). Review of Financial Studies, Forthcoming; Marshall School of Business Working Paper No. FBE 28-09. Available at SSRN: https://ssrn.com/abstract=1425469

Miguel Almeida Ferreira (Contact Author)

Nova School of Business and Economics ( email )

Campus de Campolide
Lisbon, 1099-032
Portugal

European Corporate Governance Institute (ECGI) ( email )

c/o ECARES ULB CP 114
B-1050 Brussels
Belgium

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Massimo Massa

INSEAD - Finance ( email )

Boulevard de Constance
F-77305 Fontainebleau Cedex
France
+33 1 6072 4481 (Phone)
+33 1 6072 4045 (Fax)

Pedro Matos

University of Virginia - Darden School of Business ( email )

University of Virginia
P.O. Box 6550
Charlottesville, VA 22906-6550
United States
434 243 8998 (Phone)
434 924 0726 (Fax)

HOME PAGE: http://www.darden.virginia.edu/faculty-research/directory/pedro-matos/

European Corporate Governance Institute (ECGI) ( email )

c/o ECARES ULB CP 114
B-1050 Brussels
Belgium

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