Institutional cross-ownership and M&A premiums: Micro evidence from China

Adopting micro panel data with Chinese listed firms between 2009 and 2022, this study examines the impact of Institutional Cross-ownership on acquisition premiums. The results show that common ownership significantly reduces M&A premiums, and this finding is robust to various tests and endogeneity controls. Mechanism analysis reveals that the effect operates through improved accounting quality and investment efficiency. Further evidence shows that managerial ability and perceived policy uncertainty strengthen this effect, which is more pronounced in state-owned enterprises. This study provides new micro-level evidence on institutional ownership's role in M&A pricing and offers policy implications for governance improvement. • Finds that common ownership significantly lowers acquisition premiums across firms • Identifies accounting quality and investment efficiency as key mediating channels • Shows the effect is stronger under high policy uncertainty and in state-owned firms • Offers policy insights for improving ownership transparency and institutional oversight