Institutional Monitoring, Coordination and Acquisition Decision in Chinese Public Listed Companies

Peng, Fei and Kang, Lili and Yang, Xiaocong (2014): Institutional Monitoring, Coordination and Acquisition Decision in Chinese Public Listed Companies.

Abstract

This paper endeavors to explore the roles that institutional investors play in acquisition decision of Chinese Public Listed Companies (PLCs). Acquisition decision is assumed as a cost-benefit analysis process of shareholders as strategic alliances. Using micro data in the Chinese stock market during 2003-2008, we find that institutional investors including Qualified Foreign Institutional Investors (QFII), Social Security Funds (SSF), Security Firms (SF) and Security Investment Funds (SIF), as well as tradable share (TS) concentration affect a PLC’s acquisition likelihood rather than its annual acquisition size. SSF, SIF and TS concentration can increase acquisition likelihood while QFII decrease it. This paper suggests a strategic alliance model in which institutional investors choose whether to coordinate with controlling shareholder and management. Our paper contributes to the published literature in three ways. First, we offer a conceptual framework to understand the coordination process of acquisition decision in China. Second, we identify which institutional investors could benefit from their monitoring on corporate acquisition through better post-acquisition performance and which could not. Third, we investigate whether institutional investors effectively monitor acquisiton decision or just pick cherry.

• Item Type: MPRA Paper
• Language: English
• Keywords: Corporate Governance; Institutional Monitoring; Acquisition Decision; Coordination
• Subjects: G - Financial Economics > G2 - Financial Institutions and Services > G23 - Non-bank Financial Institutions ; Financial Instruments ; Institutional Investors; G - Financial Economics > G3 - Corporate Finance and Governance > G34 - Mergers ; Acquisitions ; Restructuring ; Corporate Governance; P - Economic Systems > P1 - Capitalist Systems > P11 - Planning, Coordination, and Reform

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