DP11471 Who is afraid of BlackRock?
|Author(s):||Massimo Massa, David Schumacher, Yan Wang|
|Publication Date:||August 2016|
|Keyword(s):||Asset Management Merger, Limits to Arbitrage, liquidity, Strategic Interactions|
|JEL(s):||G11, G12, G14, G15, G23|
|Programme Areas:||Financial Economics|
|Link to this Page:||cepr.org/active/publications/discussion_papers/dp.php?dpno=11471|
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.