The impact of institutional investors on cross-border mergers and acquisitions in Europe

Due to their resources and power, institutional investors play an important role in affecting corporate strategy and governance. Mergers or acquisitions are among the most important decisions firms face in their existence, and may affect future growth and shareholder value considerably. In this paper I therefore explore the effects of institutional investors on M&A engagement by applying a probit model. Total institutional ownership does not seem to influence the decision to engage in a cross-border or domestic M&A. However, when I examine the country of origin of institutional investors and ownership concentration, I find that foreign institutional investors increase the probability of a cross-border M&A, but I find no evidence for an association between block institutional ownership and the choice of a domestic or cross-border M&A.