Learning from your investors: can the geographical composition of institutional investors affect the chance of success i
- PDF / 280,248 Bytes
- 23 Pages / 439.37 x 666.142 pts Page_size
- 34 Downloads / 178 Views
Learning from your investors: can the geographical composition of institutional investors affect the chance of success in international M&A deals? Anna Faelten • Miles Gietzmann • Valeriya Vitkova
Springer Science+Business Media New York 2013
Abstract We produce new evidence on whether management which is keen to make foreign acquisitions can benefit from consultation with information-intensive institutional investors who have expertise in the target foreign markets. This research suggests that, in such instances, management should recognise the benefit of effective two-way communication before embarking on such costly strategies. Consistent with theoretical literature, we propose that this can be explained by the fact that complex valuation information is dispersed among many economic agents and management may only have limited access to such data. This research shows that the likelihood of both cross-border deal completion and medium-term crossborder deal success through time depends upon management learning from and getting the support of key institutional investors with regional (foreign) expertise. The theoretical information economics model presented by Dye and Sridhar in 2002 states that the information flow between management and capital markets should be viewed as two way. This study offers empirical evidence in support of their theory. This study offers insights into the positive effect of establishing a proactive investor relations programme for the recruitment of dedicated foreign institutional investors before embarking on cross-border M&A. The results indicate that management should closely monitor the share register and identify those investors who are transient and those who are, in contrast, dedicated. Attention then needs to be directed to establishing effective communication with the dedicated investors with regional expertise. Keywords Cross-border M&A Institutional investors Investor relations Financial geography
A. Faelten M. Gietzmann (&) V. Vitkova Faculty of Finance, M&A Research Centre, Cass Business School, 106 Bunhill Row, London EC1Y 8TZ, UK e-mail: [email protected]
123
A. Faelten et al.
1 Introduction The recently published UK Stewardship Code (July 2010) stresses the importance of institutional investors recognising their responsibility for exercising effective corporate governance and communicating this to retail investors. For instance, those institutional investors who wish to be seen as complying with the code need to give a clear indication of how they approach corporate governance issues across all potential portfolio constituents and how they determine their voting strategy at AGMs and EGMs. For the most part, the recommendations of the code have received widespread (apparent) acceptance and a significant number of institutional investors have issued a ‘Statement on Compliance’ which adheres to the new code. However, Winter (2011) and Wong (2010) make clear, that while the Stewardship Code makes sense for institutional investors who take an active lon
Data Loading...
