Dual Ownership, Returns, and Voting in Mergers
42 Pages Posted: 12 Feb 2014 Last revised: 13 Feb 2014
Date Written: January 24, 2014
We document that in M&As a significant proportion of targets’ equity is owned by financial institutions that simultaneously own targets’ bonds (“dual holders”). Targets with larger equity ownership by dual holders have lower M&A equity premia and larger abnormal bond returns, particularly when dual holders stand to benefit more from appreciation of their bond stakes, e.g., when their bond ownership in the target is large and the target credit rating is non-investment grade. Dual holders are more likely to vote in favor of the merger proposal. Our results suggest the presence of coordination of decisions within dual holding financial conglomerates in M&A targets.
Keywords: dual holders, shareholders, bondholders, M&As, abnormal return, financial conglomerates
JEL Classification: G23, G32, G34
Suggested Citation: Suggested Citation