INSTITUTIONAL INVESTORS AND ACQUISITION TARGETS

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Abstract

Firms with higher levels of institutional ownership are more likely to be acquired. This paper shows that this positive correlation is due to ownership endogeneity. Institutional investors are better informed investors and buy acquisition targets. After controlling for this ownership endogeneity, the presence of institutional investors reduces the probability of being acquired. Our result further shows that mutual funds or funds with high turnover rates are more likely to benefit from selective disclosure prior to Regulation Fair Disclosure and the presence of public pension funds increases the announcement premiums that targets receive, which indicates a monitoring effect.

Keywords: Institutional Investors, Monitoring, Merger and Acquisition, Regulation FD, Corporate Governance

How to cite this paper: Qi, L., & Wan, H. (2012). Institutional investors and acquisition targets. Corporate Ownership & Control, 9(3-4),428-441. https://doi.org/10.22495/cocv9i3c4art2