Mergers and acquisitions and institutional ownership in the United Kingdom

Yang, Shuai

January 2014

Thesis or dissertation

© 2014 Shuai Yang. All rights reserved. No part of this publication may be reproduced without the written permission of the copyright holder.

This thesis focuses on the topic of mergers and acquisitions (M&As) in the UK from 2000 to 2010. This thesis investigates and clarifies the determinants of takeover strategies employed by acquirers including, deal payment method, choice of target, influence exerted by institutional investors and the market reactions to the deal announcement. One of the most important factors documented in this thesis is the institutional ownership, the role it has in external monitoring and the reduction in information asymmetries and agency costs.

Institutional investors’ control of the equity market has grown rapidly in the UK during the last decade, and they control approximately 50% of the UK equity market. This thesis finds that institutional ownership plays a significant role in the firms’ M&A strategies.

The empirical evidence shows that the acquirer firms with high levels of institutional ownership have a higher probability of paying through cash while earn-outs are preferred when acquirer firms experiences financial crisis. Meanwhile, this research establishes that institutional investors are effective external monitors that should be involved in a firms’ real strategies decision process. Specifically, high levels of institutional ownership have a positive relationship with cross-border M&As’ full control and large transactions. Additionally, both institutional ownership concentration and foreign institutional ownership are significantly positively associated with cross-border deals. However, only the foreign institutional ownership positively associates with large size deals. Moreover, UK acquirers receive significant positive returns at the announcement time of the M&A deals. Both the high institutional ownership concentration and total institutional ownership are positively associated with post-M&A short-term abnormal returns.

Business School, The University of Hull
Andriosopoulos, Dimitris; Ozkan, Aydin (Professor of finance)
Qualification level
Qualification name
3 MB
QR Code