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Takeover threats, institutional ownership, and investment efficiency

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  • Yolanda Yulong Wang

    (SAFTI - Shenzhen Audencia Financial Technology Institute)

  • Long Yi

    (SAFTI - Shenzhen Audencia Financial Technology Institute)

Abstract

We provide a novel framework to understand the complementary role between takeover threats and institutional ownership in ensuring high investment efficiency: institutional investors produce information which alleviates the negative impact of takeover threats while takeover threats empower institutional investors. Utilizing exogenous variations of takeover threats, we find consistent evidence with the model. The complementary relation is stronger for firms in industries that emphasize short-term earnings. Additional tests reveal the findings are unlikely the result of selection. As a result of the complementary relation, antitakeover provisions are detrimental to investment efficiency when institutional ownership is high.

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  • Yolanda Yulong Wang & Long Yi, 2025. "Takeover threats, institutional ownership, and investment efficiency," Post-Print hal-05143757, HAL.
    • Handle: RePEc:hal:journl:hal-05143757
    DOI: 10.1016/j.iref.2025.104213
    Note: View the original document on HAL open archive server: https://hal.science/hal-05143757v1
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