Conflicts of Interests Among Shareholders: The Case of Corporate Acquisitions / Jarrad Harford, Dirk Jenter, Kai Li.

Format:

Book

Author/Creator:

Harford, Jarrad.

Contributor:

National Bureau of Economic Research.

Jenter, Dirk.

Li, Kai.

Series:

Working Paper Series (National Bureau of Economic Research) no. w13274.

NBER working paper series no. w13274

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Other Title:

Conflicts of Interests Among Shareholders

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2007.

Summary:

We identify important conflicts of interests among shareholders and examine their effects on corporate decisions. When a firm is considering an action that affects other firms in its shareholders' portfolios, shareholders with heterogeneous portfolios may disagree about whether to proceed. This effect is measurable and potentially large in the case of corporate acquisitions, where bidder shareholders with holdings in the target want management to maximize a weighted average of both firms' equity values. Empirically, we show that such cross-holdings are large for a significant group of institutional shareholders in the average acquisition and for a majority of institutional shareholders in a significant number of deals. We find evidence that managers consider cross-holdings when identifying potential targets and that they trade off cross-holdings with synergies when selecting them. Overall, we conclude that conflicts of interests among shareholders are sizeable and, at least in the case of acquisitions, affect managerial decisions.

Notes:

Print version record

July 2007.