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Mutual fund skill and the performance of corporate acquirers

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  • Nain, Amrita
  • Yao, Tong

Abstract

We show that the commonly observed correlation between institutional investor ownership and the success of mergers is partly driven by active stock picking. Several mutual fund stock selection skill measures strongly predict the post-merger performance of corporate acquirers even after controlling for possible shareholder monitoring. These findings are stronger for funds with characteristics more indicative of active stock picking. Moreover, firms held by funds with higher stock selection skills are more likely to subsequently become acquirers, suggesting that the mutual fund skill set includes the ability to identify acquirers with value-enhancing acquisition opportunities.

Suggested Citation

  • Nain, Amrita & Yao, Tong, 2013. "Mutual fund skill and the performance of corporate acquirers," Journal of Financial Economics, Elsevier, vol. 110(2), pages 437-456.
  • Handle: RePEc:eee:jfinec:v:110:y:2013:i:2:p:437-456
    DOI: 10.1016/j.jfineco.2013.06.005
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    Cited by:

    1. Feng, Xunan & Johansson, Anders C., 2015. "Can mutual funds pick stocks in China? Evidence from the IPO market," Journal of Banking & Finance, Elsevier, vol. 55(C), pages 170-186.
    2. Vidal-García, Javier & Vidal, Marta & Boubaker, Sabri & Uddin, Gazi Salah, 2016. "The short-term persistence of international mutual fund performance," Economic Modelling, Elsevier, vol. 52(PB), pages 926-938.
    3. Bi, XiaoGang & Wang, Danni, 2015. "Role of single largest investors: Examples of mutual funds and acquisitions," Finance Research Letters, Elsevier, vol. 14(C), pages 104-110.
    4. Hong Zhu & Qi Zhu, 2016. "Mergers and acquisitions by Chinese firms: A review and comparison with other mergers and acquisitions research in the leading journals," Asia Pacific Journal of Management, Springer, vol. 33(4), pages 1107-1149, December.

    More about this item

    Keywords

    Mergers and acquisitions; Corporate governance; Mutual funds; Stock selection;

    JEL classification:

    • 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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