NBER

Institutional Trading Around M&A Announcements

Eliezer Fich, Viktoriya Lantushenko, Clemens Sialm

Bibliographic Information

NBER Working Paper No. 25814
Issued in May 2019
NBER Program(s):AP, CF

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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.

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