Who is Afraid of Blackrock?

77 Pages Posted: 6 Sep 2016

See all articles by Massimo Massa

Massimo Massa

INSEAD - Finance

David Schumacher

McGill University

Yan Wang

McMaster University

Multiple version iconThere are 2 versions of this paper

Date Written: August 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: Asset Management Merger, Limits to Arbitrage, liquidity, Strategic Interactions

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

Suggested Citation

Massa, Massimo and Schumacher, David and Wang, Yan, Who is Afraid of Blackrock? (August 2016). CEPR Discussion Paper No. DP11471. Available at SSRN: https://ssrn.com/abstract=2834808

Massimo Massa (Contact Author)

INSEAD - Finance ( email )

Boulevard de Constance
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+33 1 6072 4045 (Fax)

David Schumacher

McGill University ( email )

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

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

Yan Wang

McMaster University ( email )

1280 Main Street West
Hamilton, Ontario L8S 4M4
Canada

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