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Large Shareholders and Target Returns: International Evidence

Global Corporate Governance

ISBN: 978-1-78635-166-1, eISBN: 978-1-78635-165-4

ISSN: 1569-3732

Publication date: 30 March 2017


We examine the market valuation of targets with multiple large shareholders (MLS) and single large shareholder (SLS) structures, in an international sample of M&A announcement in 19 countries outside North America. We find that the presence and power of MLS in these firms are negatively associated with abnormal returns and first-bid-to-merger-completion returns, suggesting that MLS mitigate agency problems in the target, and hence their acquisition is perceived as “a loss of good governance.” The negative association between MLS targets and returns is stronger in widely held firms suggesting that MLS indeed curb expropriation of minority shareholders. By contrast, when the second largest shareholder in the MLS structure of the target is a family, we find positive cumulative abnormal returns at the merger announcement, suggesting exacerbated agency problems in these firms that should benefit from the “acquisition of good governance.” Our evidence is robust to a battery of tests and to addressing potential endogeneity.




We acknowledge the financial support from the Canada’s Social Science and Humanities Research Council (SSHRC), and generous support of N. Murray Edwards through the Centre for Strategic Financial Management. We also thank seminar participants at AIB-UKI (2012).


Boubakri, N., Cosset, J.-C. and Mishra, D. (2017), "Large Shareholders and Target Returns: International Evidence ", Global Corporate Governance (Advances in Financial Economics, Vol. 19), Emerald Publishing Limited, Bingley, pp. 103-145.



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