Discussion Paper Details

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Title: Who is afraid of BlackRock?

Author(s): Massimo Massa, David Schumacher and Yan Wang

Publication Date: August 2016

Keyword(s): Asset Management Merger, Limits to Arbitrage, liquidity and Strategic Interactions

Programme Area(s): Financial Economics

Abstract: We use the merger of BlackRock with Barclays Global Investors to study how changes in ownership concentration affect the investment behavior of financial institutions and the cross-section of stocks worldwide. We find that other institutions begin avoiding stocks that experience a merger-related increase in ownership concentration. As a result, affected stocks experience a permanent and negative price, liquidity and volatility impact. We confirm these effects in a large sample of asset management mergers over a ten year period. The interpretation that institutions strategically avoid stocks with an elevated risk of future fragility enjoys the strongest support in the data.

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Bibliographic Reference

Massa, M, Schumacher, D and Wang, Y. 2016. 'Who is afraid of BlackRock?'. London, Centre for Economic Policy Research.