Beyond the Target: M&A Decisions and Rival Ownership

54 Pages Posted: 18 Aug 2018 Last revised: 2 Dec 2019

See all articles by Miguel Anton

Miguel Anton

University of Navarra, IESE Business School

José Azar

University of Navarra, IESE Business School; CEPR

Mireia Gine

IESE Business School, University of Navarra ; The University of Pennsylvania

Luca Xianran Lin

University of Navarra, IESE Business School

Date Written: November 27, 2019

Abstract

Diversified acquirer shareholders can profit from value-destroying acquisitions not only through their target stakes, but also through their stakes in non-merging rival firms. We find that announcement losses are largely mitigated for the average acquirer shareholder when accounting for wealth effects on their rival stakes. Close to a third of acquirer shareholders benefit from bad acquisitions at the industry portfolio level. Rival ownership by acquirer shareholders is negatively associated with acquirer CAR and deal synergies, while positively associated with the probability of bad deal completion. These results help explain why shareholders often lack incentives to monitor against value-destroying acquisitions.

Keywords: Common Ownership, Mergers and Acquisitions, Synergies, Institutional Investors

JEL Classification: G23, G30, G34

Suggested Citation

Anton, Miguel and Azar, José and Gine, Mireia and Lin, Luca Xianran, Beyond the Target: M&A Decisions and Rival Ownership (November 27, 2019). Available at SSRN: https://ssrn.com/abstract=3226390 or http://dx.doi.org/10.2139/ssrn.3226390

Miguel Anton

University of Navarra, IESE Business School ( email )

Avenida Pearson 21
Barcelona, 08034
Spain

José Azar

University of Navarra, IESE Business School ( email )

Avenida Pearson 21
Barcelona, 08034
Spain

CEPR ( email )

London
United Kingdom

HOME PAGE: http://https://sites.google.com/site/joseazar/

Mireia Gine

IESE Business School, University of Navarra ( email )

Avenida Pearson 21
Barcelona, 08034
Spain

The University of Pennsylvania ( email )

Philadelphia, PA 19104
United States

Luca Xianran Lin (Contact Author)

University of Navarra, IESE Business School ( email )

Avenida Pearson, 21
IESE Business School, H-300
Barcelona, Barcelona 08034
Spain

HOME PAGE: http://lucaxlin.com

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