INSTITUTIONAL INVESTORS AND CROSS-BORDER MERGERS AND ACQUISITIONS: THE 2000-2012 PERIOD

Abstract

Using mergers and acquisitions (M&As) from 26 countries between 2000 and 2012, I examine the role of foreign and domestic institutional investors in cross-border M&As. I have several findings. First, both foreign and domestic institutional ownerships increase significantly during the period 2000-2012.Meanwhile, the volume of the cross-border M&As does not increase during the same time period. Second, domestic institutional investors facilitate both domestic and cross-border M&As. However, this seems to be inconsistent with the negative impact of domestic institutional ownership on the intensity of cross-border M&A activity, as reported in Ferreira et al. (2010). I discover that domestic institutional investors facilitate domestic M&As more effectively than cross-border M&As, which contributes to the finding in Ferreira et al. (2010). Third, domestic institutional investors can facilitate cross-border M&As more effectively when the acquirer country has greater financial freedom than the target country. Last but not least, while previous studies use either Tobit or Ordinary Least Squares regressions to examine the determinants of country-level volume and intensity of cross-border M&A activity, I show that zero-inflated Poisson regressions should be used instead.