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Shareholders at the Gate? Cross-Country Evidence on the Role of Institutional Investors in Mergers and Acquisitions ∗

By Miguel A. Ferreira, Massimo Massa and Pedro Matos


We study how institutional investors affect the volume and pattern of mergers and acquisitions (M&A) around the world. Using a comprehensive data set of equity holdings from 26 countries in the 2000-2005 period, we find that institutional ownership, especially by foreign institutions, is positively associated with M&A activity worldwide. Foreign institutional ownership (unlike domestic institutional ownership) is positively associated with the probability of a deal being cross-border, its success, and the probability that the bidder takes full control of the target. Furthermore, abnormal returns around announcements are higher when institutions are present as shareholders in both the target and acquirer firms. Our results suggest that foreign institutional investors build “bridges ” between firms internationally and act as facilitators in the international market for corporate control

Year: 2007
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