Who Is Afraid of BlackRock?
74 Pages Posted: 9 Aug 2015 Last revised: 29 May 2016
Date Written: May 27, 2016
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: Suggested Citation