Smart Investments by Smart Money: Evidence from Acquirers’ Projected Synergies
49 Pages Posted: 1 May 2019
Date Written: March 30, 2019
Institutional investors tend to accumulate the shares of firms that announce acquisitions. The tendency to accumulate shares is stronger when the acquirer discloses synergy forecasts, and it is especially strong when the disclosed synergies are higher. This evidence is consistent with the idea that institutional investors are attracted to situations where their superior access to management and analysts provides an information advantage. Indeed, this tendency to accumulate information sensitive shares is especially strong for hedge funds, which tend to have the greatest information advantage. Moreover, stock prices respond favorably in the quarter following the acquisition announcement when higher institutional holdings are revealed.
Keywords: Stock Picking; Mergers; Acquisitions; Institutional Investors
JEL Classification: G23, G140
Suggested Citation: Suggested Citation