Owners on both sides of the deal: Mergers and acquisitions and overlapping institutional ownership

Although management scholars debate the value creating potential of mergers and acquisitions, the practice is so widespread that the U.S. deals announced in the last decade exceed ten trillion dollars. The present study, using a corporate governance lens, examines the impact of heterogeneous interests of owners on mergers and acquisitions outcomes. In particular we look at how overlapping ownership, i.e. when owners have a stake in both the acquiring and the target firms, impacts the M&A gains of the acquirer. The empirical results suggest that when more institutional owners of the acquiring firm simultaneously hold stock in the target company, acquiring firms are more likely to destroy shareholder value through M&A deals; this effect however is constrained by stronger board control.