Publikationen

This paper examines how institutional investors exchange private information through co-shareholding networks and the implications for corporate acquisition outcomes. Using New York City taxi data, we identify face-to-face interactions among investor pairs and document that co-blockholders are more likely to seek on-site meetings, consistent with an increased exchange of information. Given evidence for an information channel, we construct the broader blockholder network between US institutional investors and show that acquirers held by more centrally positioned institutional investors earn higher announcement returns. The valuation effect is strongest when targets are more opaque and private information is more valuable. Consistent with an advisory channel, the effect only exits among investors with a comparative advantage in exploiting information, and facilitates “hidden gem” acquisitions rather than preventing poor deals. Overall, our findings suggest that co-shareholding networks promote private information flows that translate into superior advice and enhance M&A performance.

We examine 17,207 U.S. mergers and acquisitions by public firms over the 1980–2019 period and find that the acquirer abnormal announcement returns are higher for firms held by more central investors in the network of active institutional blockholdings. This finding is robust to firm and deal characteristics, and it also extends to alternative network and return measures. To provide evidence on causality, we exploit extreme industry returns that lead to plausibly exogenous variation in investors’ monitoring ability. The positive effect of blockholder centrality on acquirer abnormal announcement returns only exists in information-sensitive (i.e., private) deals and only among institutions that have a comparative advantage in exploiting monitoring information. Our findings suggests that institutional investors obtain an information advantage through the network, which increases their monitoring ability.

This paper examines the impact of takeover law enforcement on corporate acquisitions. We use the European Takeover Directive as a natural experiment, which harmonizes takeover law across countries, while leaving its enforcement to the discretion of individual countries. We exploit this heterogeneity in enforcement quality across countries in a difference-in-differences-in-differences model, while employing an overall inductive research approach, following Karpoff and Whittry’s (2018) recommendation. We find that acquirer returns increase in countries with improvements in takeover law, driven by better target selection and lower cost of financing. The increase in acquirer returns is lower in weak enforcement jurisdictions, which we identify by developing a novel Takeover Law Enforcement Index (TLEI). The findings show that takeover law can mitigate agency conflicts, but its true value depends on its enforcement. Our results are strongly robust to alternative model specifications.

Merger control exists to help safeguard effective competition. However, findings from a natural experiment suggest that regulatory merger control reduces the profitability of corporate acquisitions. Uncertainty about merger control decisions reduces takeover threats from foreign and very large acquirers, therefore facilitating agency-motivated deals. Valuation effects are more pronounced in countries with stronger law enforcement and in more concentrated industries. Our results suggest that competition policy may impede the efficiency of the M&A market.