The Role Of Institutional Investors On International Merger And Acquisitions

This paper studies the role of institutional investors in international merger and acquisitions of Chinese enterprises from2001to2011. Academia considers that institutional investors can facilitate enterprises to integrate with global merger and acquisition activities, but due to undeveloped Chinese institutional background, this kind of relationship is not that obvious. We investigate both short-term and long-term M&A performance for Chinese enterprises under consideration of institutional investors’participation. In short run, we found as an acquirer in international M&A business, abnormal return is higher with higher institutional holdings. If these companies receive foreign institutional investment, abnormal return would be higher. In long run, it is found that existence of institutional investors’ holding can’t increase enterprises’ international M&A performance. In addition, there also exists "size-discount" puzzle for these Chinese enterprises. However, performance for enterprises with foreign institutional investors’ holdings would be improved to some degree. We conclude that institutional investors’ participation in Chinese enterprise international M&A on speculative purpose in short time horizon, instead of with participation in long-run corporate governance intention. Involvement of foreign institutional investors can contribute of growth of Chinese capital market and development of Chinese domestic institutional investors.