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Journal articles (2005), Journal of Financial Economics, 76 (1), pp. 135-165

Shareholder Investment Horizons and the Market for Corporate Control


This paper investigates how the investment horizon of a firm's institutional shareholders impacts the market for corporate control. We find that target firms with short-term shareholders are more likely to receive an acquisition bid but get lower premiums. In addition, we find that bidder firms with short-term shareholders experience significantly worse abnormal returns around the merger announcement, as well as higher long-run underperformance. These findings suggest that firms held by short-term investors have a weaker bargaining position in acquisitions. Weaker monitoring from short-term shareholders could allow managers to proceed with value-reducing acquisitions at the expense of shareholder returns.

GASPAR, J.M., MASSA, M. and MATOS, P. (2005). Shareholder Investment Horizons and the Market for Corporate Control. Journal of Financial Economics, 76(1), pp. 135-165.