Institutional Investor and M&A Premium: The Moderating Effect of Internal Control

Abstract

This study uses a total of 1895 M&A samples of Chinese listed companies during 2009-2019 to explore the effect of institutional investor’s shareholding on the M&A premium and the influence of internal control. The results show that the increase in the shareholding ratio of institutional investors can reduce the M&A premium; among the M&A companies with low agency costs, institutional investors have more significant inhibitory effect on the M&A premium; if the M&A is a related transaction, the institutional investor can do well in restraining the M&A premium. Internal control has a positive moderating role in the inhibition effect of institutional investors on M&A premium. The institutional investors have more significant inhibitory effect in non-state-owned enterprises with good internal control, while in state-owned enterprises this effect is insignificant.