Common Ownership and Competition in Mergers and Acquisitions

43 Pages Posted: 10 Oct 2019

See all articles by Mohammad (Vahid) Irani

Mohammad (Vahid) Irani

University of South Carolina - Darla Moore School of Business

Wenhao Yang

Chinese University of Hong Kong, Shenzhen

Feng Zhang

University of Utah - Department of Finance

Date Written: September 29, 2019

Abstract

We examine the impacts of common ownership on competition in the takeover market. We find that one common owner between the acquirer and potential competing acquirers reduces the likelihood that the target receives a competing bid by 45 percent. The common ownership effects are robust to a long battery of additional tests and are causal according to two identification strategies, one based on mergers between financial institutions that shock common ownership and the other based on lagged common ownership as an instrumental variable. Abated competition between potential acquirers leads to better acquisition deals with greater synergy gains, and enables the acquirer shareholders to obtain a larger share of the synergy gains.

Keywords: common ownership, competition, mergers and acquisitions, acquisition bids

JEL Classification: G34

Suggested Citation

Irani, Mohammad (Vahid) and Yang, Wenhao and Zhang, Feng, Common Ownership and Competition in Mergers and Acquisitions (September 29, 2019). Available at SSRN: https://ssrn.com/abstract=3461284 or http://dx.doi.org/10.2139/ssrn.3461284

Mohammad (Vahid) Irani (Contact Author)

University of South Carolina - Darla Moore School of Business ( email )

1014 Greene Street
Columbia, SC 29208
United States

HOME PAGE: http://sc.edu/study/colleges_schools/moore/directory/irani_mohammad.php

Wenhao Yang

Chinese University of Hong Kong, Shenzhen ( email )

2001 Longxiang Road, Longgang District
Shenzhen, 518172
China

Feng Zhang

University of Utah - Department of Finance ( email )

David Eccles School of Business
Salt Lake City, UT 84112-9303
United States

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