Institutional cross-ownership and corporate strategy: the case of mergers and acquisitions

Chris Brooks, Zhong Chen, Yeqin Zeng

Research output: Contribution to journalArticle (Academic Journal)peer-review

96 Citations (Scopus)


This article provides new evidence on the important role of institutional investors in affecting corporate strategy. Institutional cross-ownership between two firms not only increases the probability of them merging, but also affects the outcomes of mergers and acquisitions (MAs). Institutional cross-ownership reduces deal premiums, increases stock payment in MA transactions, and lowers the completion probabilities of deals with negative acquirer announcement returns. Furthermore, deals with high institutional cross-ownership have lower transaction costs and disclose more transparent financial statement information. The effect of cross-ownership on the total deal synergies and post-deal long-term performance is positive, which can be attributed to independent and non-transient cross-owners. Our findings are robust after mitigating the cross-ownership asymmetry concern. Overall, our results suggest that the growth of institutional cross-holdings in U.S. stock markets may greatly change corporate strategies and decision-making processes.
Original languageEnglish
Pages (from-to)187-216
Number of pages30
JournalJournal of Corporate Finance
Publication statusPublished - 1 Feb 2018


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