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Cross-Ownership, Returns and Voting in Mergers

Stanford Graduate School of Business Research Paper No. 1921

Posted: 24 Jan 2006 Last revised: 12 Jan 2012

Michael Ostrovsky

Stanford Graduate School of Business

Gregor Matvos

University of Chicago - Booth School of Business

Date Written: January 1, 2006

Abstract

We show that institutional shareholders of acquiring companies on average do not lose money around public merger announcements, because they also hold substantial stakes in the targets and make up for the losses from the former with the gains from the latter. Depending on their holdings in the target, acquirer shareholders may realize different returns from the same merger, some losing money and others gaining. Using a novel dataset we show that this conflict of interests is reflected in the mutual fund voting behavior: in mergers with negative acquirer announcement returns, cross-owners are more likely to vote for the merger.

Keywords: mergers and acquisitions

JEL Classification: G34, G20

Suggested Citation

Ostrovsky, Michael and Matvos, Gregor, Cross-Ownership, Returns and Voting in Mergers (January 1, 2006). Stanford Graduate School of Business Research Paper No. 1921. Available at SSRN: https://ssrn.com/abstract=877199 or http://dx.doi.org/10.2139/ssrn.877199

Michael Ostrovsky (Contact Author)

Stanford Graduate School of Business ( email )

655 Knight Way
Stanford, CA 94305
United States
650-724-7280 (Phone)

HOME PAGE: http://faculty-gsb.stanford.edu/ostrovsky/

Gregor Matvos

University of Chicago - Booth School of Business ( email )

5807 S. Woodlawn Avenue
Chicago, IL 60637
United States

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