Acquisitions and the shareholder base

Nicholas Wonder (Department of Finance and Marketing, College of Business and Economics, Western Washington University, Bellingham, Washington, USA)
Claire Lending (Department of Finance and Marketing, College of Business and Economics, Western Washington University, Bellingham, Washington, USA) (Department of Finance, College of Business, Auburn University, Auburn, Alabama, USA)

Managerial Finance

ISSN: 0307-4358

Publication date: 13 June 2019



The purpose of this paper is to study the impact of acquisitions on the number of shareholders of the acquirer (the shareholder base) and relate that effect to the method of payment and the ratio between the target’s and acquirer’s shareholder bases prior to the acquisition.


Using 348 acquisitions from 1993 to 2013 for which both parties are public, American firms, the paper measures changes in the acquirer’s shareholder base from before announcement through to four years after completion. OLS regressions, together with an instrumental variables approach addressing the endogeneity of acquisition payment, indicate the determinants of those changes.


Acquisitions completed partly or entirely in stock lead to large increases in the shareholder base, and the increases mostly endure over the four-year window examined in the study. Regression results indicate that the target to acquirer shareholder ratio has a much greater impact on the acquirer’s base for stock acquisitions than for cash acquisitions. The ratio is also associated with changes in beta.

Practical implications

Because existing theoretical and empirical literature shows that the shareholder base impacts the risk, liquidity, and market value of stock, managers evaluating potential targets and modes of payment may wish to consider the likely impact on their firms’ shareholder bases, as may investors contemplating the effects of an acquisition announcement.


This is the first work documenting both a short- and long-term impact of acquisitions on the shareholder base and the first to investigate the determinants of the change in the base.



Wonder, N. and Lending, C. (2019), "Acquisitions and the shareholder base", Managerial Finance, Vol. ahead-of-print No. ahead-of-print.

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