Institutional Trading Around M&A Announcements

57 Pages Posted: 20 Dec 2018 Last revised: 1 Jun 2020

See all articles by Eliezer M. Fich

Eliezer M. Fich

Drexel University - Department of Finance

Viktoriya Lantushenko

Saint Joseph's University

Clemens Sialm

University of Texas at Austin - McCombs School of Business; National Bureau of Economic Research (NBER)

Date Written: May 31, 2020

Abstract

We contrast the investment strategies of hedge funds and mutual funds around M&A transactions. We find that hedge funds increase their holdings of soon-to-be takeover targets by 7.5% during the quarter before M&A announcements. Conversely, mutual funds reduce their equity holdings in impending targets by 3.0% over the same time period. More actively managed mutual funds decrease their holdings in to-be targets to a significantly lesser extent than their peers. These results, which withstand several robustness tests, suggest that hedge funds enjoy superior access to private information or possess better skills to process public information.

Keywords: M&A, Mutual Funds, Hedge Funds, Performance

JEL Classification: G14, G23, G24, G34

Suggested Citation

Fich, Eliezer M. and Lantushenko, Viktoriya and Sialm, Clemens, Institutional Trading Around M&A Announcements (May 31, 2020). Available at SSRN: https://ssrn.com/abstract=3297800 or http://dx.doi.org/10.2139/ssrn.3297800

Eliezer M. Fich

Drexel University - Department of Finance ( email )

LeBow College of Business
3220 Market Street – 11th Floor
Philadelphia, PA 19104
(215) 895-2304 (Phone)

Viktoriya Lantushenko

Saint Joseph's University ( email )

5600 City Avenue,
Philadelphia, PA 19131
United States

Clemens Sialm (Contact Author)

University of Texas at Austin - McCombs School of Business ( email )

Austin, TX 78712
United States

HOME PAGE: http://faculty.mccombs.utexas.edu/Clemens.Sialm/

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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