Finance Research Letters, volume 17, pages 118-124

Value creation by block acquisitions and the importance of block owner identity

Mark Mietzner 1, 2
Dirk Schiereck 2
1
 
Chair of Finance, FIF Institute, Zeppelin University, Am Seemoser Horn 20, D-88045 Friedrichshafen, Germany
Publication typeJournal Article
Publication date2016-05-01
scimago Q1
SJR1.903
CiteScore11.1
Impact factor7.4
ISSN15446123, 15446131
Finance
Abstract
We examine stock price reactions to minority block purchases in German target companies. Our results document that the formation of new outside blocks leads to significant value creation for target shareholders, the size of the effect depending on the identity of the block acquirer. As blocks by strategic investors or activist sponsors entail significantly higher returns compared to pure financial block acquirers this result can be ascribed to a differentiated support of the monitoring hypothesis of agency theory. We also find a negative relation between target firms’ growth before the acquisition and the value generation by new block owners.

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