The impact of institutional investors on mergers and acquisitions in the United Kingdom

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Abstract

In this paper we investigate the impact of institutional ownership on UK mergers and acquisitions. We employ a comprehensive sample of M&As conducted by UK acquirers from 2000 to 2010, thus including a full cycle of peak and trough in M&A waves. We find that institutional investors increase the likelihood of an M&A to be a large, cross-border deal, opting for full control. Moreover, institutional ownership concentration and foreign institutional ownership increase the likelihood of cross-border M&As. In addition, we assess the influence of institutional shareholders’ investment horizon and find that while investment horizon have a negative influence in encouraging cross-border M&As, the presence of long-term investors encourages larger M&As. Finally, even after controlling for the 2007-08 financial crisis the market reacts negatively to the announcement of cross-border M&As.
Original languageEnglish
Pages (from-to)547-561
Number of pages15
JournalJournal of Banking and Finance
Volume50
Early online date13 Jun 2014
DOIs
Publication statusPublished - 31 Jan 2015

Keywords

  • institutional investors
  • mergers and acquisitions
  • cross-border
  • investment horizon
  • endogeneity
  • financial crisis

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