Owners on Both Sides of the Deal: Mergers and Acquisitions and Overlapping Institutional Ownership

Strategic Management Journal, 31(10): 1114-1135, 2010

22 Pages Posted: 25 Jan 2014

See all articles by Maria L. Goranova

Maria L. Goranova

University of Wisconsin - Milwaukee

Ravi Dharwadkar

Syracuse University - Whitman School of Management

Pamela M. Brandes

Syracuse University

Date Written: October 1, 2010

Abstract

Using a corporate governance lens, this study considers owners with a stake in both the acquiring and the target firms in the context of mergers and acquisitions. A possible agency problem arises with regard to monitoring implications as managers may be able to take advantage of compromised monitoring because overlapping owners may focus on the aggregate value for both the acquiring and the target firms and nonoverlapping owners may be interested only in the acquirer's side of the deal. The results suggest that when more owners overlap in their ownership of both the acquiring and target firms, the acquiring firms are more likely to experience decreased shareholder value through merger and acquisition deals. This effect, however, can be constrained by stronger board control.

Keywords: corporate governance, mergers and acquisitions, institutional ownership, M&A, ownership portfolio

JEL Classification: G3

Suggested Citation

Goranova, Maria L. and Dharwadkar, Ravi and Brandes, Pamela M., Owners on Both Sides of the Deal: Mergers and Acquisitions and Overlapping Institutional Ownership (October 1, 2010). Strategic Management Journal, 31(10): 1114-1135, 2010, Available at SSRN: https://ssrn.com/abstract=2384633

Maria L. Goranova (Contact Author)

University of Wisconsin - Milwaukee ( email )

P.O. Box 742
3202 N. Maryland Ave.
Milwaukee, WI 53201-0742
United States

Ravi Dharwadkar

Syracuse University - Whitman School of Management ( email )

721 University Avenue
Syracuse, NY 13244-2130
United States

Pamela M. Brandes

Syracuse University ( email )

900 S. Crouse Avenue
Syracuse, NY 13244-2130
United States

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