This paper shows that firms engage in less M&A activity when they have large public pension fund (PPF) owners. For example, the presence of a 5% PPF blockholder reduces the frequency of acquisitions by about 7%. An extra 3% in ownership by the top PPF owner reduces the size of acquisition (measured as a fraction of acquiror value) by about 3%. The effect is stronger when PPF ownership is more concentrated and when firms suffer from greater agency conflicts. The presence of other types of institutions and managerial compensation has no M&A reducing effect. These findings suggest that public pension funds play an important and unusual role in corporate governance.
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