Minority Shareholders' Wealth Effects and Stock Market Development: Evidence from Increase-in-Ownership M&As
Journal of Banking & Finance, Vol. 34, pp. 681-694, 2010
51 Pages Posted: 3 Mar 2008 Last revised: 18 Apr 2011
Date Written: August 2, 2009
This paper examines, using a global M&A data set, the relationship between the target firm’s minority shareholders’ returns and a country’s stock market development in deals in which large shareholders increase their ownership stakes. For the purpose of this study, we use two measures of stock market development: (1) turnover over GDP, and (2) turnover over market capitalization. We provide evidence supporting the view that minority shareholders in target firms gain significantly more in countries with high stock market development than their counterparts in less-developed markets. Our results are robust to several firm and deal characteristics and provide evidence to policy makers that the degree of stock market development is a key determinant in improving minority shareholders’ welfare.
Keywords: minority shareholders, stock market development, increase-in-ownership mergers, target returns
JEL Classification: G34
Suggested Citation: Suggested Citation