IDEAS home Printed from https://ideas.repec.org/a/cup/jfinqa/v49y2014i01p221-248_00.html
   My bibliography  Save this article

Does the Disposition Effect Matter in Corporate Takeovers? Evidence from Institutional Investors of Target Companies

Author

Listed:
  • Ye, Pengfei

Abstract

This paper examines whether one of the most important participants in the takeover market, the institutional investors of target companies, suffers from the disposition effect and, if so, how this selling bias influences the takeover outcomes. I report robust evidence that target institutional investors are reluctant to realize losses. This bias further allows their sunk cost to affect both the takeover price and the deal success. My results are explained by neither the undervalued targets nor the 52-week-high price effect. They are most pronounced among targets whose investors have a strong propensity to hold on to loser stocks.

Suggested Citation

  • Ye, Pengfei, 2014. "Does the Disposition Effect Matter in Corporate Takeovers? Evidence from Institutional Investors of Target Companies," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 49(1), pages 221-248, February.
    • Handle: RePEc:cup:jfinqa:v:49:y:2014:i:01:p:221-248_00
    as

    Download full text from publisher

    File URL: https://www.cambridge.org/core/product/identifier/S0022109014000180/type/journal_article
    File Function: link to article abstract page
    Download Restriction: no
    ---><---

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Yasuhiro Iwanaga & Takehide Hirose & Tomohiro Yoshida, 2024. "Decomposing the Momentum in the Japanese Stock Market," Asia-Pacific Financial Markets, Springer;Japanese Association of Financial Economics and Engineering, vol. 31(2), pages 221-250, June.
    2. Lauterbach, Beni & Mugerman, Yevgeny & Shemesh, Joshua, 2024. "Prospect theory in M&A: Do historical purchase prices affect merger offer premiums and announcement returns?," Journal of Behavioral and Experimental Finance, Elsevier, vol. 42(C).
    3. Dang, Man & Henry, Darren & Yin, Xiangkang & Vo, Thuy Anh, 2018. "Target corporate governance, acquirers' location choices, and partial acquisitions," Pacific-Basin Finance Journal, Elsevier, vol. 50(C), pages 82-104.
    4. Ang, James S. & Ismail, Ahmad K., 2015. "What premiums do target shareholders expect? Explaining negative returns upon offer announcements," Journal of Corporate Finance, Elsevier, vol. 30(C), pages 245-256.
    5. Hong Zhu & Qi Zhu, 2016. "Mergers and acquisitions by Chinese firms: A review and comparison with other mergers and acquisitions research in the leading journals," Asia Pacific Journal of Management, Springer, vol. 33(4), pages 1107-1149, December.
    6. Wu, Qinqin & Chou, Robin K. & Lu, Jing, 2020. "How does air pollution-induced fund-manager mood affect stock markets in China?," Journal of Behavioral and Experimental Finance, Elsevier, vol. 28(C).
    7. Dang, Man & Henry, Darren, 2016. "Partial-control versus full-control acquisitions: Does target corporate governance matter? Evidence from eight East and Southeast Asian countries," Pacific-Basin Finance Journal, Elsevier, vol. 40(PB), pages 251-265.
    8. Chen, Yangyang & Podolski, Edward J. & Rhee, S. Ghon & Veeraraghavan, Madhu, 2017. "Do progressive social norms affect economic outcomes? Evidence from corporate takeovers," Journal of Empirical Finance, Elsevier, vol. 41(C), pages 76-95.
    9. Braun, Declan & Han, Yue & Wang, Heng Emily, 2023. "The application of feed forward neural networks to merger arbitrage: A return-based analysis," Finance Research Letters, Elsevier, vol. 58(PB).
    10. Linnenluecke, Martina K. & Chen, Xiaoyan & Ling, Xin & Smith, Tom & Zhu, Yushu, 2017. "Research in finance: A review of influential publications and a research agenda," Pacific-Basin Finance Journal, Elsevier, vol. 43(C), pages 188-199.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cup:jfinqa:v:49:y:2014:i:01:p:221-248_00. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Kirk Stebbing (email available below). General contact details of provider: https://www.cambridge.org/jfq .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.