Who Is Afraid of BlackRock?

74 Pages Posted: 9 Aug 2015 Last revised: 29 May 2016

Massimo Massa

INSEAD - Finance

David Schumacher

McGill University

Yan Wang

Erasmus University Rotterdam (EUR) - Rotterdam School of Management (RSM)

Multiple version iconThere are 2 versions of this paper

Date Written: May 27, 2016

Abstract

We use the merger of BlackRock with Barclays Global Investors to study how changes in ownership concentration affect the investment behavior of financial institutions and the cross-section of stocks worldwide. We find that other institutions begin avoiding stocks that experience a merger-related increase in ownership concentration. As a result, affected stocks experience a permanent and negative price, liquidity and volatility impact. We confirm these effects in a large sample of asset management mergers over a ten year period. The interpretation that institutions strategically avoid stocks with an elevated risk of future fragility enjoys the strongest support in the data.

Keywords: Strategic Interactions, Asset Management Merger, Liquidity, Limits to Arbitrage

JEL Classification: G11, G12, G14, G15, G23

Suggested Citation

Massa, Massimo and Schumacher, David and Wang, Yan, Who Is Afraid of BlackRock? (May 27, 2016). INSEAD Working Paper No. 2015/60/FIN. Available at SSRN: https://ssrn.com/abstract=2641078 or http://dx.doi.org/10.2139/ssrn.2641078

Massimo Massa

INSEAD - Finance ( email )

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

David Schumacher (Contact Author)

McGill University ( email )

1001 Sherbrooke St. W
Montreal, Quebec H3A 1G5
Canada
5143984778 (Phone)

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

Yan Wang

Erasmus University Rotterdam (EUR) - Rotterdam School of Management (RSM) ( email )

Room T08-46
Burgemeester Oudlaan 50
3062 PA Rotterdam, 3062 PA
Netherlands

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

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