Publication Type

Journal Article

Publication Date

11-2007

Abstract

Within a cost–benefit framework, we hypothesize that independent institutions with long-term investments will specialize in monitoring and influencing efforts rather than trading. Other institutions will not monitor. Using acquisition decisions to reveal monitoring, we show that only concentrated holdings by independent long-term institutions are related to post-merger performance. Further, the presence of these institutions makes withdrawal of bad bids more likely. These institutions make long-term portfolio adjustments rather than trading for short-term gain and only sell in advance of very bad outcomes. Examining total institutional holdings or even concentrated holdings by other types of institutions masks important variation in the subset of monitoring institutions.

Keywords

Corporate governance, Institutional investors, Mergers and acquisitions, Monitoring, Trading

Discipline

Accounting | Corporate Finance

Research Areas

Financial Performance Analysis

Publication

Journal of Financial Economics

Volume

86

Issue

2

First Page

279

Last Page

305

ISSN

0304-405X

Identifier

10.1016/j.jfineco.2006.09.005

Publisher

Elsevier

Copyright Owner and License

Authors

Creative Commons License

Creative Commons Attribution-Noncommercial-No Derivative Works 4.0 License
This work is licensed under a Creative Commons Attribution-Noncommercial-No Derivative Works 4.0 License.

Additional URL

http://doi.org/10.1016/j.jfineco.2006.09.005

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