Working Paper: NBER ID: w25814
Authors: Eliezer Fich; Viktoriya Lantushenko; Clemens Sialm
Abstract: Takeover targets often experience substantial share price appreciations around public announcements of mergers and acquisitions. We analyze hedge fund and mutual fund holdings around takeover announcements to assess the differences in investment strategies across institutions. Our results indicate that hedge funds in the aggregate increase their holdings of soon-to-be takeover targets by 7.2% during the quarter prior to the public announcement. Conversely, mutual funds reduce their equity holdings in impending targets by 3.0% during the quarter before M&A announcements and therefore potentially forgo profitable investment opportunities.
Keywords: Mergers and Acquisitions; Hedge Funds; Mutual Funds; Institutional Trading
JEL Codes: G14; G23; G24; G34
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Hedge Funds increase their holdings in soon-to-be takeover targets (G34) | Ownership Changes (G34) |
| Mutual Funds decrease their holdings in soon-to-be takeover targets (G34) | Ownership Changes (G34) |
| Ownership Changes by Hedge Funds (G34) | Economic Significance of Ownership Changes (G32) |
| Ownership Changes by Mutual Funds (G34) | Economic Significance of Ownership Changes (G32) |