The Horizon Cross-Shareholding and the Efficiency of Corporate M&A

This paper studied the actions and revenues of the potential acquirers in corporation mergers and acquisitions by mechanism design theory. When the acquirers (bidders) held the shares of their rivals and participated in the takeovers, their actions and revenues will be changed. Because of the externalities on the revenues and costs during the takeover biddings, the bidders with cross-shareholdings will bid more positive than the independent acquirers with no cross-shareholdings. Among the bidders with cross-shareholdings, the bidder who holding less shares in his rivals will bid more positive than the bidders with more cross-shareholdings in his rivals.