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Can common institutional owners inhibit bad mergers and acquisitions? Evidence from China

Author

Listed:
  • Zhu, Siyuan
  • Lu, Rong
  • Xu, Tianli
  • Wu, Wenbin
  • Chen, Yang

Abstract

Using a sample of Chinese A-share listed companies from 2007 to 2020, we explore the impact of common institutional owners on M&A activities. Our results strongly support the “synergy governance” view, according to which common institutional owners perform more actively and effectively in monitoring against bad M&As and improving M&A quality, especially for investors who have closer peer linkages, greater industry power, and longer-term holdings. The mechanism test finds that in firms with poorer information environment, vaguer industry information and lower governance level, common institutional owners have a more significant inhibitory effect on bad M&As, confirming that they do have information advantages and supervisory advantages. Overall, our research explores the positive side of common institutional investors.

Suggested Citation

  • Zhu, Siyuan & Lu, Rong & Xu, Tianli & Wu, Wenbin & Chen, Yang, 2024. "Can common institutional owners inhibit bad mergers and acquisitions? Evidence from China," International Review of Economics & Finance, Elsevier, vol. 89(PA), pages 246-266.
    • Handle: RePEc:eee:reveco:v:89:y:2024:i:pa:p:246-266
    DOI: 10.1016/j.iref.2023.07.045
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    Keywords

    Common institutional owners; Conspiracy tort; Synergy governance; Bad mergers and acquisitions; Merger and acquisition performance;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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