TY  - JOUR
AU  - Harford,Jarrad
AU  - Jenter,Dirk
AU  - Li,Kai
TI  - Conflicts of Interests Among Shareholders: The Case of Corporate Acquisitions
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 13274
PY  - 2007
Y2  - July 2007
UR  - http://www.nber.org/papers/w13274
L1  - http://www.nber.org/papers/w13274.pdf
N1  - Author contact info:
Jarrad Harford
University of Washington Business School
Box 353200
Seattle, WA 98195-3200
E-Mail: jarrad@u.washington.edu

Dirk Jenter
Stanford University
Graduate School of Business
655 Knight Way
Stanford, CA 94305-5015
Tel: 650/498-4411
E-Mail: djenter@stanford.edu

Kai Li
Sauder School of Business
University of British Columbia
2053 Main Mall
Vancouver, BC V6T 1Z2
Tel: 604-822-8353
Fax: 604-822-4695
E-Mail: kai.li@sauder.ubc.ca
AB  - We identify important conflicts of interests among shareholders and examine their effects on corporate decisions.  When a firm is considering an action that affects other firms in its shareholders' portfolios, shareholders with heterogeneous portfolios may disagree about whether to proceed.  This effect is measurable and potentially large in the case of corporate acquisitions, where bidder shareholders with holdings in the target want management to maximize a weighted average of both firms' equity values.  Empirically, we show that such cross-holdings are large for a significant group of institutional shareholders in the average acquisition and for a majority of institutional shareholders in a significant number of deals.  We find evidence that managers consider cross-holdings when identifying potential targets and that they trade off cross-holdings with synergies when selecting them.  Overall, we conclude that conflicts of interests among shareholders are sizeable and, at least in the case of acquisitions, affect managerial decisions.
ER  -