Do Hedge Funds Shape Merger Payment?

53 Pages Posted: 13 Feb 2018 Last revised: 30 Mar 2021

See all articles by Ning Gao

Ning Gao

Manchester Accounting and Finance Group, Alliance Manchester Business School, University of Manchester

Olga Kolokolova

University of Manchester - Alliance Manchester Business School

Achim Mattes

University of Konstanz

Date Written: March 30, 2021

Abstract

Using a sample of mergers & acquisitions and hedge-fund holdings from 1995 to 2009, we find that pre-merger hedge-fund holdings in target firms increase proportion of payment made in cash, but not the premium. In the presence of hedge-fund holdings, higher unexpected cash payment leads to a higher likelihood of deal completion, shortens deal duration, but has no effects on premium. At the same time, target firms held by high-turnover hedge funds are more likely to accept bidders' overvalued equity. Overall, hedge funds holding target firms shape merger payment in ways that do not necessarily benefit target firms' long-term shareholders.

Keywords: Hedge funds, merger payment, short-term investors, long-term shareholders

JEL Classification: G23, G34

Suggested Citation

Gao, Ning and Kolokolova, Olga and Mattes, Achim, Do Hedge Funds Shape Merger Payment? (March 30, 2021). Available at SSRN: https://ssrn.com/abstract=3113216 or http://dx.doi.org/10.2139/ssrn.3113216

Ning Gao

Manchester Accounting and Finance Group, Alliance Manchester Business School, University of Manchester ( email )

Booth Street East
.
Manchester, M13 9SS
United Kingdom

HOME PAGE: http://www.research.manchester.ac.uk/portal/Ning.Gao.html

Olga Kolokolova (Contact Author)

University of Manchester - Alliance Manchester Business School ( email )

Booth Street West
Manchester, M15 6PB
United Kingdom
+441613062081 (Phone)

Achim Mattes

University of Konstanz ( email )

Universitaetsstrasse 10
Konstanz, D-78457
Germany

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