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Ultimate Institutional Owner and Takeover Defenses in the Controlling versus Minority Shareholders Context


*Department of Finance and Accounting, University of Las Palmas de Gran Canaria, 35.017 Las Palmas de Gran Canaria, Spain. Tel: 0034928451817; Fax: 0034928458177; E-mail:


Manuscript Type: Empirical

Research Question/Issue: We examine the relationship between the level of voting rights held by the principal owner and the use of defense measures in Spanish listed firms when the owner is an institutional investor.

Research Findings/Results: When a bank or a fund is the principal shareholder, the level of defense increases. However, while a larger bank's voting rights exercises a negative effect on the probability and level of defense, the effect of a fund's voting rights is U-shaped. Moreover, the results show that the coalition of two banks as the largest shareholders increases the defense.

Theoretical Implications: Our study is, to the best of our knowledge, the first to analyze the relationship between institutional control and defense in the controlling versus minority shareholders conflict. The results show the importance of the nature of the institutional owner in the ownership-protection relationship. Thus, while in banks there is a substitution effect between voting rights and anti-takeover measures, in funds that substitution effect occurs up to a certain level of voting rights, above which defense increases because of the possible reduction of exit barriers of their investment.

Practical Implications: The results indicate that European regulators should pay special attention to firms controlled by institutional investors. Ownership and anti-takeover measures are used by institutional owners to guarantee their power positions. Therefore, in an environment of concentrated ownership, the presence of institutional investors restricts the corporate control market as they either maintain high levels of ownership or facilitate the adoption of defense measures.