Geographic Concentration of Institutional Investors and the Market for Corporate Control

2012 Western Finance Association Conference Paper

50 Pages Posted: 21 Mar 2011 Last revised: 9 May 2019

See all articles by Jiekun Huang

Jiekun Huang

University of Illinois at Urbana-Champaign - Department of Finance

Date Written: May 4, 2019

Abstract

This paper examines the relation between the geographic concentration of institutional shareholders and shareholder gains in corporate control transactions. I find that target firms with a greater geographic concentration of institutional shareholders experience significantly higher abnormal returns around the takeover announcement. In a similar vein, acquirer firms with a greater geographic concentration of institutional shareholders are associated with higher acquisition announcement returns. Using the 1999 free communication rule as a shock to shareholder coordination, I find that firms with a greater geographic concentration of institutional shareholders are more positively impacted by the reform. Further, I find evidence suggesting that geographic concentration facilitates coordinated voting against merger proposals that are not in the shareholders' best interests. These findings are consistent with the hypothesis that geographic concentration promotes coordination among institutional shareholders and enhances their monitoring role in corporate control transactions.

Keywords: Coordination; Institutional investors; Mergers and acquisitions; Shareholder monitoring; Proxy reform

JEL Classification: G23, G34

Suggested Citation

Huang, Jiekun, Geographic Concentration of Institutional Investors and the Market for Corporate Control (May 4, 2019). 2012 Western Finance Association Conference Paper. Available at SSRN: https://ssrn.com/abstract=1787744 or http://dx.doi.org/10.2139/ssrn.1787744

Jiekun Huang (Contact Author)

University of Illinois at Urbana-Champaign - Department of Finance ( email )

1206 South Sixth Street
Champaign, IL 61820
United States

HOME PAGE: http://www.huangjk.info

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