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

Author

Listed:
  • Peng, Fei
  • Kang, Lili
  • Yang, Xiaocong

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.

Suggested Citation

  • Peng, Fei & Kang, Lili & Yang, Xiaocong, 2014. "Institutional Monitoring, Coordination and Acquisition Decision in Chinese Public Listed Companies," MPRA Paper 63746, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:63746
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    References listed on IDEAS

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    More about this item

    Keywords

    Corporate Governance; Institutional Monitoring; Acquisition Decision; Coordination;
    All these keywords.

    JEL classification:

    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • P11 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - Planning, Coordination, and Reform

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