A Study of the Value of Institutional Investor Involvement in M&A Activities of Nordic Corporations

This article examines the impact of the interaction between institutional investors and large shareholders in value creation process. Our study of Nordic companies from 2001 to 2016 finds a positive relationship between mergers and acquisitions (M&A) initiation and the ownership levels of both large shareholders and institutional investors, while their interaction shows a negative influence. We found no evidence that mergers are driven by value expropriation motives, as the gap between voting and cash flow rights of the largest shareholder has no significant impact on M&A likelihood. While market reactions suggest potential value expropriation by large shareholders, post-merger performance analysis does not support this hypothesis. Overall, our findings suggest that large shareholders, rather than destroying value, contribute to value creation in Nordic companies, with institutional investors playing a role in safeguarding this process.