Who is afraid of BlackRock?
Massimo Massa

David Schumacher

Yan Wang*

INSEAD

McGill University

McMaster University

We exploit the merger between BlackRock and Barclays Global Investors to study how changes in expected ownership
concentration affect the investment behavior of funds and the cross-section of stocks worldwide. We find that funds
with open-end structures and a large exposure to commonly-held stocks begin avoiding these stocks following the
merger announcement. This leads to a permanent change in the composition of institutional ownership and a negative
price and liquidity impact. We confirm these results in a large sample of global asset management mergers. Our
findings suggest that market participants act strategically in response to changes in expected financial fragility.

Version: This version: May 25, 2020. First version: August 7, 2015.
JEL Classification: G11, G12, G14, G15, G23.
Keywords: Financial Fragility, Strategic Interactions, Asset Management Mergers

*

We would like to thank Andres Almazan, Yakov Amihud, Sebastien Betermier, Tony Cookson, Tarun Chordia,
Shaun Davies (discussant), Adolfo de Motta, David Dicks, Darrell Duffie, Mark Flannery, Jean-Sebastien Fontaine,
Francesco Franzoni, Nicolae Garleanu, Itay Goldstein (the editor), Todd Gormley, Robin Greenwood, Leonid Kogan,
Kate Litvack (discussant), Mancy Luo, Alberto Manconi, Robert Jenkins, Andrew Karolyi, David Robinson, Martin
Schmalz, Sergei Sarkissian, Elvira Solji, Mathijs van Dijk, James Weston (discussant), Steven Xiao, David Yermack,
3 anonymous referees, seminar participants at the NYU-Penn Law and Finance Conference, ASU Sonoran Winter
Finance Conference, the Young Scholars Finance Consortium, Bank of Canada, Laval University and Syracuse
University, as well as several investment professionals and financial journalists for comments and feedback. Massimo
Massa, INSEAD, 1 Ayer Rajah Avenue, Singapore 138676, Email: massimo.massa@insead.edu, Phone: +65-67995344. Corresponding author: David Schumacher, Desautels Faculty of Management, McGill University, 1001
Sherbrooke Street West, Montreal, QC, H3A 1G5, Canada, Email: david.schumacher@mcgill.ca, Phone: +1-514-3984778. Yan Wang, DeGroote School of Management, McMaster University, 1280 Main Street West, Hamilton, ON,
L8S 4L8, Canada Email: ywang@mcmaster.ca, Phone: +1-905-525-9140. Massa and Schumacher are grateful for
research support from the Social Sciences and Humanities Research Council of Canada (SSHRC; grant number 4352015-0615), Schumacher further acknowledges support from the Institute of Financial Mathematics of Montreal
(IFM2) and the Fonds de recherche du Quebec (FRQSC; grant number 2016-NP-193354). All errors are our own.
Electronic copy available at: https://ssrn.com/abstract=2641078

“In 25 years, BlackRock has become the world’s biggest investor. Is its dominance a problem?”
The Economist, December 7, 2013.

Despite the ominous title, the cover story of the December 7, 2013 issue of The Economist took a
conciliatory tone arguing that “If the regulators’ concern is to avoid a repeat of the last crisis, they are
barking up the wrong tree. Unlike banks, whose loans and deposits go on their balance-sheets as assets and
liabilities, BlackRock is a mere manager of other people’s money. […] Whereas banks tumble if their assets
lose even a fraction of their value, BlackRock can pass on any shortfalls to its clients, and withstand far
greater shocks. In fact, by being on hand to pick up assets cheaply from distressed sellers, an unleveraged
asset manager arguably stabilizes markets rather than disrupting them.”
The logic of the Economist is in line with the standard folk-theorem in finance: since BlackRock’s
investment is not levered, there is little reason to associate the firm with systemic risk. As such, a large
presence of BlackRock among the shareholders could be beneficial and a source of stock price stability.
In this paper, we articulate an alternative hypothesis that is not based on the potential systemic risk
associated with leverage but instead relates open-end structures of funds to the potentially destabilizing
market impact of fire sales faced by BlackRock. By asking (and testing) how other market participants
factor in this possibility, we reach a different conclusion from the one put forward by the Economist.
Our alternative hypothesis focuses on the strategic responses of other market participants to changes
in expected financial fragility created by an increase in expected ownership concentration. In particular, we
draw on two distinct notions of financial fragility. The first posits that stock price fragility arises from
concentrated ownership as in Greenwood and Thesmar (2011). If ownership is concentrated, nonfundamental liquidity shocks across its few owners do not diversify perfectly. This can render the stock
price “fragile”, i.e., more sensitive to non-fundamental shocks, especially when such shocks are volatile
and correlated across owners.
The second notion relies on the presence of strategic complementarities that arise when the actions of
market players reinforce each other. Such complementarities can give rise to a multiplier effect that

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amplifies the effect of the initial reason that triggered the action.1 Chen, Goldstein, and Jiang (2010) and
Goldstein, Jiang, and Ng (2017) identify such complementarities in the context of open-end fund (OEF)
flows. The OEF structure allows investors to redeem their shares at the daily-close net asset value while
largely imposing the associated redemption costs (e.g., transaction costs, price impact, deviations from
optimal portfolios) on those investors that remain in the fund. This negative externality leads to a “firstmover advantage” that makes the redemption decisions of mutual fund investors’ strategic complements
and which can, in the extreme, lead to a run on the fund.2 Such strategic complementarities are a particular
concern for funds with illiquid portfolios as they face higher redemption costs leading to worse externalities
for the remaining investors.
We argue that the joint effect of these two notions in the context of asset management implies that
investors and / or fund managers would want to account not only for the behavior of other investors in the
same fund but also for the behavior of investors in other funds, in particular when those funds are
“connected” via common portfolio holdings or correlated liquidity shocks. For example, fire-sales
following large redemption requests to one fund will impact the performance of other funds holding the
same stocks (and induce redemptions) or make it costly to sell in general (if those funds happen to face
redemptions at the same time).3 Stock price fragility in the sense of Greenwood and Thesmar (2011) will
magnify concerns about strategic complementarities.
Specifically, we argue that fund managers are aware of both stock price fragility and the strategic
behavior of investors. If so, when facing changes in expected financial fragility, fund managers will not
wait passively until it materializes but will instead take strategic actions themselves to pre-empt and manage
their exposure to it. That is, a change in expected future fragility will lead to strategic reactions by the fund

1

The decisions of two or more players are strategic complements if they mutually reinforce one another, and
they are strategic substitutes if they mutually offset one another (Bulow, Geanakoplos, and Klemperer 1985). For
example, as Chen, Goldstein, and Jiang (2010) describe the impact of strategic complementarities as follows: “when
investors’ incentive to take a certain action increases in the expectation that other investors will take the same action,
a multiplier effect is expected to emerge, amplifying the effect of fundamentals on investors’ behavior”.
2
The mechanism has parallels to theories of bank runs (e.g., Diamond and Dybvig 1983).
3
There is ample evidence that flow-induced trading has price impact (e.g., Coval and Stafford 2007; Frazzini
and Lamont 2008; Lou 2012).

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managers even before any fund experiences a liquidity shock of any kind. Strategic behavior of this kind
will lead to changes in the ownership structure of the affected stocks, away from funds that are concerned
about a potential exposure to future fragility and towards funds that are better able to manage it (e.g.,
investors with longer investment horizons).
This hypothesis translates into two testable restrictions. First, an increase in expected fragility will
induce asset managers to rebalance their portfolios away from affected stocks. This behavior will be
magnified for illiquid stocks (because price impact is larger for them), and for asset managers with a larger
exposure to future fragility. We expect asset managers with such a larger exposure to be funds with (i)
open-end structures, (ii) correlated flows with other funds holding the same stock, (iii) concentrated
positions in those stocks, and (iv) illiquid portfolios.
Second, these actions will have a stock price impact. Portfolio rebalancing of the kind described will
lead to a change in the composition of ownership, away from the investors with an elevated concern of
future fragility and to the investors better able to manage and absorb such liquidity shocks. The latter will
accommodate the rebalancing of the former at a discount that will lead to a reduction in the stock price.
This discount can be temporary if it only reflects the temporary rebalancing of some market participants or
it can be permanent. The latter would be the case if, for example, the new ownership structure of affected
stocks is permanently tilted towards investors with longer investment horizons. This could make these
stocks less liquid as these investors trade less (e.g., Stoll 2000; Rubin 2007; Brockman et al. 2009).
It is important to note that our hypothesis is cast in terms of strategic reactions by a particular group
of investors in anticipation of an increase in expected ownership concentration and, by extension, expected
fragility. Whether ownership concentration and fragility increases ex post is ambiguous because changes in
realized fragility are determined by the aggregation of all these individual actions. For example, if the funds
with the largest exposure rebalance the most, their actions may mitigate any expected increase in fragility
and, to the extent that individual funds cannot perfectly take into account how their rebalancing affects the

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aggregate outcome, fragility may in fact stay constant or even decline ex post.4 In fact, we expect the
rebalancing of individual funds to be characterized by a lack of coordination which may introduce a
discrepancy between the expected increase in fragility from the perspective of each individual fund and the
realized change in fragility which is an aggregate outcome.5
We exploit consolidation in the global asset management industry to test our hypotheses. In doing so,
we make a key assumption that we empirically verify within our sample: we conjecture that investors
associate funds with the fund family / asset management firm they are affiliated with, which will create
comovement in redemptions and flows. This assumption is well supported in the literature. For example,
common affiliation was shown to lead to spillover effects within and across fund families (e.g., Nanda,
Wang and Zhang 2004; Sialm and Tham 2016). The 2003 “Late Trading Scandal” triggered average
outflows of 14% (24%) of assets under management over the following year (2 years) for the implicated
mutual fund families (Kisin 2011) and had a significant impact on the stocks commonly held by implicated
funds (Anton and Polk 2014).
If common affiliation increases flow comovement, the relevant unit of analysis is ownership
concentration / stock price fragility computed from holdings and flow information at the asset management
firm-level (rather than fund-level).6 Therefore, we focus on mergers between asset management firms and
on two samples in particular: the first one is the BlackRock acquisition of Barclays Global Investors (BGI)
and the second is an extended sample including all asset management mergers in the period 2002 to 2012
(and excluding the BlackRock-BGI merger). We interpret a merger announcement between two asset
managers as an increase in the expected ownership concentration and therefore financial fragility (as per

4

Related to this, the implications for e.g., stock price volatility are also unclear. One the one hand, volatility may
increase if indeed ownership concentration and fragility increase and liquidity shocks begin to materialize. On the
other hand, if the composition of ownership changes with the most exposed funds rebalancing away, volatility may
decrease if realized fragility also decreases.
5
The argument has parallels with theories based on strategic behavior where agents cannot perfectly coordinate
(e.g., Grossman and Hart (1980) in the context of tender offers or Diamond and Dybvig (1983) in the context of bank
runs) and in which expectations of individual actors can be different from realized outcomes because individual agents
fail to internalize how their action impacts the aggregate outcome.
6
As such, unless explicitly stated otherwise, our variables of ownership concentration and stock price fragility
are all computed using holdings and flow information at the asset management firm level (i.e., aggregated across all
funds affiliated with a particular asset management firm).

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Greenwood and Thesmar 2011) as funds managed by the bidder and target typically have considerable
portfolio overlap and gain a common affiliation via the merger. Therefore, these mergers provide a suitable
testing ground to examine strategic reactions in response to concerns about future liquidity shocks to the
combined entity (e.g., large redemption requests) combined with an increase in expected ownership
concentration and fragility.7
We structure the main analysis around the BlackRock-BGI merger for a number of reasons. First, the
merger is unprecedented in scale, involving $2.7 trillion in assets under management (AUM). The combined
pre-merger BlackRock-BGI ownership accounted for 10% of the total institutional ownership for the stocks
in the highest quintile of portfolio overlap. This translates into an expected 8.5% change in ownership
concentration for those stocks. Second, the event affected a large number of stocks to varying degrees,
providing a necessary source of cross-sectional variation: over 60% of world market capitalization was
directly affected as these stocks were held by both BlackRock and BGI funds prior to the merger. Third,
the acquisition was exogenous to the characteristics of the stocks held in the portfolios of BlackRock and
BGI funds. Indeed, Barclays sold BGI in order to raise funds to strengthen its balance sheet in the wake of
the 2008 global financial crisis. BlackRock acquired BGI in order to aggressively grow AUM and become
a preeminent asset manager with a unique ability to tailor portfolios to client needs. The nature of the deal
helps with the identification of strategic interactions, or “peer effects”, among investors, a topic plagued by
endogeneity problems (Manski’s 1993 “reflection problem”).
We start with the first hypothesis. We examine portfolio rebalancing by funds other than those
managed by BlackRock and BGI (“residual funds”). We find that, upon the announcement of the merger in
June 2009, residual funds rebalance away from stocks with a higher expected increase in ownership
concentration. The effect is present only among the stocks held by both BlackRock and BGI funds before

7

There are also plenty of examples that the markets and investors reacts to firm-specific events. For example,
the market has reacted to financial scandals triggered by e.g., rogue-traders and internal governance failures (e.g., the
2008 incident at Société Générale or the 2012 “London Whale”), or even departures of star fund managers (e.g., the
departure of Bill Gross from PIMCO).

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the deal, stronger in small-cap and illiquid stocks, and concentrated in the semi-annual period following the
announcement (and not detectable before that). Also, the effect does not revert in subsequent periods.
A decomposition of this aggregate result shows that the effect is driven by the rebalancing of OEFs,
consistent with notion that OEFs are particularly concerned with financial fragility due to the strategic
complementarities they may face. For the group of non-OEFs, we find no change of investment behavior.
If anything, some evidence suggests that non-OEFs rebalance towards stocks with high combined
BlackRock-BGI ownership (thereby accommodating the rebalancing of OEFs) although in some
specifications, we cannot rule out that this reflects longer-term trends. In contrast, OEFs change their
investment behavior precisely in the period following the merger announcement, leading to a change in the
composition of institutional ownership away from OEFs and towards non-OEFs at that time. In particular,
the level of OEF ownership drops by 70 bps in the period following the merger announcement for stocks
in the highest relative to the lowest quintile of combined BlackRock-BGI ownership8 while the level of
total institutional ownership is unaffected. In other words, the merger announcement is followed by a
reallocation of institutional ownership, away from the funds with a high exposure to future fragility and
towards the funds with a low exposure.
We then further decompose the sample of OEFs to understand which fund characteristics are
associated with more portfolio rebalancing. Consistent with our first testable restriction, we find that OEFs
with a high flow correlation with either BlackRock-BGI funds or all the other funds holding the affected
stocks rebalance more aggressively compared to funds with a low correlation of flows. Also, funds with
large excess portfolio positions in the affected stocks or with an overall high level of portfolio concentration
rebalance more aggressively. This suggests that funds with a higher exposure to an increase in expected
fragility (either because their liquidity shocks co-move with those of the other owners including BlackRockBGI or because they have large and concentrated positions in those stocks) respond more to the merger

8

This corresponds to about 3% (5%) of the level of OEF ownership for top-quintile (all) stocks prior to the
merger announcement.

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announcement. Moreover, funds with illiquid portfolios rebalance more aggressively, pointing again to an
elevated concern about strategic complementarities as a driver of portfolio rebalancing.
Next, we turn to the second prediction and test whether the aggregate portfolio rebalancing and the
reallocation of institutional ownership away from OEFs impacts the price of the affected stocks. To sharpen
our identification, we conduct a series of short-run event studies at the daily frequency around key dates in
the merger process. We define two key moments in the evolution of the merger: the merger announcement
on June 11, 2009 and the antitrust approval by the European Commission on September 23, 2009. Both
dates represent significant changes to the probability that the deal will ultimately complete (which it did on
December 1, 2009).
We find that abnormal returns in a 2-day event window around the antitrust approval event (including
the event and the following trading day) are monotonically decreasing in the expected increase in ownership
concentration, the result robust to controlling for a large number of firm-specific observables.9 Also, we
find no evidence of a pre-announcement drift or a post-announcement reversal of these abnormal returns.
In economic terms, our estimates suggest that the stock price drops between 23 basis points and 1.4% per
day in the event window for the stocks in the highest relative to the lowest quintile of expected increase in
ownership concentration. We find neither price reversals after the deal completion date, nor any statistical
relationship between expected increase in ownership concentration and daily abnormal returns on a number
of placebo event dates.
The lack of price reversals could point to changes in stock liquidity. For example, if the departing
OEFs have shorter investment horizons compared to the non-OEFs that become more important following
the changes in ownership compositions, stock liquidity could suffer, justifying the lack of price reversals.
We confirm this and find that stocks become more illiquid as the merger evolves. In economic terms, we
find a permanent drop in stock liquidity of between 0.05 to 0.13 standard deviations over the evolution of

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Abnormal daily returns are also monotonically decreasing in the expected increase in ownership concentration
on the merger announcement date. However, for this event, the pattern is not robust in a multi-variate specification.

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the merger process for stocks in the highest relative to the lowest quintile of combined BlackRock-BGI
ownership.
Finally, we examine the realized changes in stock price fragility. We replicate the measure of
Greenwood and Thesmar (2011) which is based on holdings and flow information of OEFs and find that
stock price fragility due to OEF holdings increases, consistent with our result that open-end funds rebalance
away from affected stocks.10 However, when we construct an extended measure of stock price fragility that
is based on holdings of all funds (i.e., including OEFs and non-OEFs), we find that this extended measure
of stock price fragility decreases, consistent with the compositional shift in the ownership structures towards
more long-term investors documented previously. In line with Greenwood and Thesmar (2011), the drop
in realized fragility is related to a drop in realized stock return volatility.
Finally, we extend the analysis to a broader setting and repeat our tests using a large sample of asset
management mergers between 2002 and 2012 (excluding the years of the BlackRock-BGI merger). We find
that our main results on portfolio rebalancing, abnormal stock returns, liquidity, realized fragility, and
volatility extend to this overall sample, albeit with weaker economic and statistical significance. However,
given that the BlackRock-BGI merger affected about 14 times as much AUM as the average merger in this
extended sample only underlines the importance of this merger as the single most impactful event in this
context. At the same time, this not only shows that our results generalize to a broader setting that includes
the asset management industry overall, but also addresses any residual concern that our results are impacted
by the financial crisis of 2008 and the subsequent market recovery that took place during the BlackRockBGI merger period.
We readily acknowledge that putting the main focus on one merger brings with it a number of
empirical challenges which we address in several steps. First, we provide a large number of robustness
tests including continuous and discretized version of our treatment variable, alternative treatment

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To relate to our prior assumption that investors associate funds with the asset management firm they are
affiliated with, we also test and confirm that the correlation of flows between BlackRock and BGI funds increases in
the post-merger period.

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definitions, and additional controls that are potentially correlated with the treatment variable to address the
concern that the treatment is not randomly assigned across stocks (i.e., the pre-merger ownership of
BlackRock and BGI funds is not randomly allocated). Second, we provide additional tests to understand if
the rebalancing of OEFs is not specific to the holdings of BGI funds but instead reflective of a periodspecific change in the investment attitude towards stocks with high ETF ownership in general. We also
provide placebo tests on various merger-related event dates and we document that our results are
concentrated around the dates in which the probability of deal completion increases substantially. Third,
we perform a number of tests to evaluate if the parallel trends condition is met. This includes the use of a
short and symmetric event window coupled with a period-by-period examination of portfolio rebalancing,
robustness tests using a longer event window to test for longer term trends, additional placebo tests around
alternative event dates, and evidence from short-run event studies at the daily frequency. Fourth, we show
that all our results replicate in a broad sample of asset management mergers. Fifth, we entertain but reject
alternative interpretations of our results. For example, we find no evidence that the rebalancing of residual
funds happens in anticipation of more adverse selection because the combined BlackRock-BGI ownership
would proxy for the future information advantages that active BlackRock funds may enjoy as a result of
the merger. We also find no evidence that the rebalancing of residual funds happens in anticipation of future
trading by BlackRock funds.
Our main contribution is to connect the literature on stock price fragility (Greenwood and Thesmar,
2011) with the literatures on strategic interactions / strategic complementarities in mutual funds (Chen,
Goldstein and Jiang 2010; Goldstein, Jiang, and Ng 2017) and on the market impact of flow-induced trading
(e.g., Coval and Stafford 2007; Frazzini and Lamont 2008; Lou 2012). More broadly, we contribute to the
literature on strategic interactions in financial markets including the literature on strategic
complementarities and global games (e.g., Carlsson and Van Damme 1993; Morris and Shin 1998; Corsetti
et al. 2004; Rochet and Vives 2004; Dasgupta 2004; Goldstein and Pauzner 2004, 2005) as well as the
literature on financial runs (e.g., Diamond and Dybvig 1983; Bernardo and Welch 2004). We provide direct
evidence on strategic interactions in anticipation of changes in future fragility and its market impact.
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Strategic behavior of this kind is notoriously difficult to identify empirically, as acknowledged by Chen,
Goldstein and Jiang (2010) who provide indirect evidence of strategic complementarities using mutual fund
flows. Our experiment based on the BlackRock-BGI merger provides an exogenous source of variation of
expected ownership concentration in the global cross-section of stocks. This allows us to give a causal
interpretation to the documented effects and contributes to the debate on how concentrated ownership
affects stock markets. More importantly, the fact that we are able to observe the ex-ante strategic behavior
of other investors (i.e., before any negative shocks to BlackRock or anyone else occur and when actual
ownership changes have yet to occur) allows us to identify the ex-ante impact of concentrated ownership
on stock markets.

I.

The BlackRock-BGI Merger
In this section, we give additional detail on the merger between BlackRock and BGI, explain how we

structure our empirical analysis along the merger timeline, and discuss the strengths and weaknesses of this
natural experiment and how our empirical design takes those into account.
A.

Merger Timeline and Background
In the wake of the 2008 financial crisis, the initial owner of Barclays Global Investors (“BGI”), the

UK-based bank Barclays PLC (“Barclays”), had to sustain large loan losses that substantially weakened the
bank’s balance sheet. In order to strengthen the bank’s capital ratios, calm investors, and avoid risking a
bailout by the UK government, Barclays announced on March 16, 2009 its intention to sell the iShares unit
of BGI. This unit was (and still is) the leading global provider of exchange-traded funds (“ETFs”). On April
9, 2009, Barclays announced the sale of the iShares unit to the private equity group CVC Capital (“CVC”)
for $4.4 billion. However, the deal included a “go shop” provision that would allow another bidder to make
a higher offer for iShares within 45 days in exchange for a $175 million break-up fee to be paid to CVC.
On June 11, 2009, BlackRock Inc. (“BlackRock”) announced that it had agreed to acquire all of BGI for
$13.5 billion. The deal would make BlackRock the world’s largest money manager with assets under
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management of $2.7 trillion at that time. According to the “go shop” provision, the announcement left an
additional 5 days to CVC to make a counter offer with no additional bidder being allowed to submit another
competing offer. On June 18, 2009, the “go-shop” period expired without a counter-offer from CVC. On
September 23, 2009, the European Commission cleared the proposed acquisition under the EU Merger
Regulation concluding “that the transaction would not significantly impede effective competition in the
European Economic Area (EEA) or any substantial part of it”. On December 1, 2009, BlackRock
announced the completion of the merger with BGI.
The main strategic reasons for the merger, according to the BlackRock press release from June 11,
2009, were to “bring together market leaders in active and index strategies to create the preeminent asset
management firm” with the “unique ability to combine active, quantitative and index strategies to develop
investment solutions for institutional clients worldwide” and to offer “BlackRock’s global mutual funds
alongside iShares [to] create an unmatched ability to tailor portfolios for retail investors”. Further, “the
combined firm will have unparalleled talent, analytical tools, and scale to deliver liquidity, global presence,
and local market insight to clients.” These considerations are summarized by BlackRock Chairman and
CEO Laurence D. Fink when he says that “We are incredibly excited about the potential to significantly
expand the scale and scope of our work with investors throughout the world.” Indeed, from these quotes, it
is clear that the main drivers behind the acquisition for BlackRock were strategic motives to expand into
the fast-growing segment of ETFs (for which iShares was and still is the leading platform worldwide), to
establish a more global presence as a firm and to reap economies of scale by aggressively growing assets
under management.
B.

Empirical Design
The main empirical design we employ is a difference-in-difference (DiD) estimation. Our main

analysis is structured around the BlackRock-BGI merger but the analysis of the extended sample of all asset
management mergers is analogous.

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As indicated above, the BlackRock-BGI merger is a unique event and of particular usefulness for the
analysis. The merger is unprecedented in scale and market impact. The large portfolio overlap between
funds of both entities allows us to include the global universe of stocks in the analysis. This means that our
empirical design draws its power from a large cross-section of stocks that are affected by the merger to
varying degrees. But the most important feature is that the merger happened for reasons exogenous to
different stock characteristics and the outcome variables we are interested in. Therefore, we can interpret
the merger as an exogenous shift in the expected ownership concentration in the global cross-section of
stocks. The general specification we estimate is the following panel regression at the stock-period level:
𝑌𝑠𝑡+1 = 𝛽1 𝑇𝑠 + 𝛽2 𝑃𝑜𝑠𝑡𝑡 + 𝛽3 𝑇𝑠 × 𝑃𝑜𝑠𝑡𝑡 + 𝛾1′ 𝑋𝑠𝑡 + 𝛾2 ′(𝑋𝑠𝑡 × 𝑃𝑜𝑠𝑡𝑡 ) + 𝛼𝑡 + 𝛼𝑠 + 𝜖𝑠𝑡+1 ,

(1)

where 𝑌𝑠𝑡+1 is an outcome variable for stock s in period t+1 (e.g., measures of portfolio rebalancing
between periods t and t+1), 𝑇𝑠 are measures for the “treatment” that stock s experiences as a result of the
merger (e.g., measures of expected changes in ownership concentration due to the merger), 𝑃𝑜𝑠𝑡𝑡 includes
indicator variables for different time periods (e.g., the period following the merger announcement), and 𝑋𝑠𝑡
includes other observable stock characteristics. As is standard in a DiD framework, we include stock and
period fixed effects in the estimation (denoted 𝛼𝑠 and 𝛼𝑡 ) and the main coefficient of interest is 𝛽3 which
measures the treatment effect.
For our tests on portfolio rebalancing, we estimate equation (1) at the semi-annual frequency over a 2
year event window, symmetric around the merger announcement date. We select a 2 year window because
the merger process stretches over 9 months (March to December 2009) and we want to include at least one
full semi-annual period before and after the periods in which some merger-related event falls. We provide
robustness tests to further evaluate long term trends or reversals with a longer window from 2004 to 2014
(i.e., 5 years before and after the merger announcement). For our tests on stock returns (liquidity), we
estimate equation (1) at the daily frequency over short-run event windows that include 20 (60) trading days
before and after a particular merger-related announcement.

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Figure 1 illustrates the sample period and the various merger-related announcements that we
previously described. We highlight two dates that are of particular interest: the merger announcement on
June 11, 2009 and the anti-trust approval by the European Commission on September 23, 2009. Both
constitute significant increases in the probability that the merger will complete. As such, we expect market
participants to revise their expectations around those days. We use the remaining events for placebo tests
or additional tests for reversal or continuation effects after the deal completes in December 2009.
A few more empirical choices merit further explanation. First, for every stock, we compute alternative
measures of the treatment it undergoes as a result of the merger (e.g., the combined ownership of BlackRock
and BGI or the expected change in the Herfindahl-Hirschman index (HHI) of ownership concentration that
follows from the combination of ownership) as of June 2009. That is, we measure the treatment variables
for each stock prior to the merger, and keep the value fixed per stock for all periods in the sample. We do
this in order to (i) capture the information that was likely available to individual market participants at the
time and that can be used to proxy for the expected change in ownership concentration (and by extension
fragility) induced by the merger and (ii) use pre-determined treatment variables that do not vary with
common (and unobservable) shocks that could simultaneously impact the outcome variable 𝑌𝑠𝑡+1 . This is
especially useful for our analysis of “peer effects” in which the outcome variables measure portfolio
rebalancing by other funds. As pointed out by Manski (1993), regressing group behavior on individual
behavior (or vice versa) gives rise to the reflection problem. Using a pre-determined regressor is one part
of our strategy to address this problem (Angrist and Pischke 2008, section 4.6.2).
Second, notwithstanding the many desirable characteristics of the BlackRock-BGI merger as a natural
experiment, a lingering concern is that that stock-level treatment 𝑇𝑠 is not randomly allocated across stocks
but correlated with other stock characteristics. We evaluate this concern empirically when we discuss the
summary statistics of our sample and our empirical answer is to not only include observable and timevarying stock characteristics in the vector 𝑋𝑠𝑡 (in addition to the stock fixed effects) but to also include
interaction terms between the variables in 𝑋𝑠𝑡 and the 𝑃𝑜𝑠𝑡𝑡 event indicators. This helps us rule out that

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our results are period-specific effects due to other observable stock characteristics but instead attributable
to the combined ownership of BlackRock and BGI.
Third, the DiD framework relies on the identifying assumption of parallel trends in the outcome
variables for different levels of the treatment. We perform various tests to evaluate if this assumption is
violated. First, when we estimate equation (1) at the semi-annual frequency, the vector 𝑃𝑜𝑠𝑡𝑡 includes three
distinct period indicators (𝑃𝑅𝐸1𝑡 , 𝑃𝑂𝑆𝑇1𝑡 , and 𝑃𝑂𝑆𝑇2𝑡 , as described in Figure 1) that allow us to
precisely evaluate if changes in portfolio rebalancing happen discretely in the period following the merger
announcement or are present even before the event. Second, we repeat and display our main result on
portfolio rebalancing on a longer event window that is 5 years symmetric around the merger announcement.
This allows for further inspection if the parallel trend condition is likely met or if there are longer-run
reversals. Third, we conduct placebo tests around artificial event dates. Fourth, in some tests, we estimate
equation (1) using short-run windows at the daily frequency. This allows us to rule out long-term trends as
we can trace stock market effects to the exact trading day on or following a particular announcement. The
use of daily frequency in the analysis also allows us to examine pre-announcement drifts or postannouncement reversals with much higher accuracy compared to the analysis with lower frequency data.
To control for the impact of residual, unobservable shocks, we draw inference from standard errors
that are clustered at the stock level (or double-clustered at the stock and trading day level).11
Finally, as we indicate in the introduction, we make the assumption that investors associate funds with
the asset management firm they are affiliated with which can create flow comovement. Based on this, we
advocate that the relevant unit of analysis for ownership concentration and fragility is at the asset
management firm level which is why we use the setting of mergers between asset management firms to test
our hypothesis. To substantiate this assumption beyond the evidence presented in prior literature, we
examine how flow correlations between BlackRock and BGI funds change over the course of the merger
and present these initial tests in the Internet Appendix, Table IA.1. We compute the average flow correlation

11

When we estimate equation (1) at the semi-annual level, the short time-series of only 4 periods precludes the
use of double-clustered standard errors at the stock and period level.

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between fund pairs before the merger announcement and after the merger completion and compare how
these average correlations change. We find that monthly flows between BlackRock and BGI funds were
virtually uncorrelated before the merger but positively correlated after (the correlation is around 3.7% on a
monthly basis, Panel A). In contrast, the average correlation of flows between all residual OEFs and
BlackRock funds does not change over the same period while the average correlation of flows between all
residual OEFs and BGI fund increases weakly.12 In other words, the new affiliation between BlackRock
and BGI funds had an impact on the properties of BGI flows.13 We will return to this point in Section V
where we discuss realized changes in stock price fragility.

II.

Data Sources, Main Variables, and Descriptive Statistics

A. Data Sources
We obtain our data from several sources. We collect semi-annual (January to June and July to
December) fund holdings from the FactSet Ownership database. FactSet reports stock-level holdings for a
large variety of funds, such as mutual funds, insurance funds, ETFs and pension funds as well as the
portfolio management company and the ultimate parent company for every fund. We describe the main
steps for the BlackRock-BGI merger on which the main analysis is based here. For the extended sample
that includes all mergers in the global asset management industry, we proceed analogously and give further
details in Section VI.
For each semi-annual period, we identify all BlackRock funds as the funds with ultimate parent
“BlackRock Inc.” and Barclays funds as those with ultimate parent “Barclays PLC”.14 To identify the BGI

12

The multi-variate test in Panel B of the same table shows that the increase in the flow correlation between
BlackRock and BGI funds is more than 4 times larger compared to the increase in flow correlations between residual
funds and BGI funds, confirming that this change can be attributed to the new affiliation between BlackRock and BGI
funds and not to a period-specific effect where BGI flows are more correlated with all other fund flows.
13
This evidence is further interesting as BGI-managed funds are predominantly iShares ETFs as explained in
Section II. In other words, our results indicate that investors associate even passively-managed investment products
with the asset management firm they are associated with. Chen, Massa, and Zhang (2019) provide further evidence in
this respect as they show how flows to bank-affiliated ETFs comove with the credit risk of their sponsoring bank.
14
We also verify all the direct and indirect subsidiaries of BlackRock using the annual report of subsidiaries of
registrant “BlackRock Inc.” from the SEC Edgar database.

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funds that are involved in the merger, we select all the funds with ultimate parent “Barclays PLC” in
December 2009 in FactSet that change affiliation and appear with ultimate parent “BlackRock Inc.” in June
2010. We call these funds “BGI funds” and we cross-check their portfolio management companies in
FactSet in December 2009. We find that all funds are managed in one of eight management companies with
“Barclays Global Investors” in the company name.15 All other funds are defined to be unaffiliated with
either BlackRock or BGI, we refer to them as “residual funds” and our measures of “residual institutional
ownership” are based on this universe.
We complement the holdings information from FactSet with fund-level characteristics from the
Morningstar Global database, section global open-ended funds. The link between FactSet and Morningstar
is as in Chuprinin, Massa, and Schumacher (2015) and updated for the newer sample used here. From
Morningstar, we primarily rely on information on individual fund flows that we use in the construction of
certain variables and tests that are described below. Finally, we collect information on global stock returns,
trading volume, and accounting information from the Thomson DataStream and WorldScope databases.
B.

Main Variables
We limit the description to the construction of the main treatment variables and our measures of

portfolio rebalancing. A complete list of all variable definitions (including all control and outcome variables
such as abnormal stock returns and liquidity) is provided in Appendix A.
Our main sample includes 7,348 stocks that are held by at least one BGI fund as of June 2009 (i.e.,
prior to the merger completion date). For each stock, we construct two variables that capture the expected
change in the ownership concentration and we think of these variables as alternative measures of the
treatment the stocks experience as a result of the merger. The first measure is 𝐼𝑂 𝐵𝑅 + 𝐵𝐺𝐼𝑠 , computed as
the total number of shares held by BlackRock and BGI funds divided by shares outstanding. The combined

15

Since management company and ultimate parent information is static in FactSet, we rely on multiple
downloads of the database in the years 2008, 2009 and 2010 to identify the correct affiliations over time. The eight
management companies with “Barclays Global Investors” in the company name are different regional subsidiaries
(e.g., North America, UK, Germany, etc.).

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pre-merger ownership of BlackRock and BGI funds is a direct and simple estimate of the joint ownership
after the merger and therefore proxies for the potential concerns of other institutional investors holding that
stocks. As second measure, we compute the variable DHERFs as the change in the HHI of ownership
concentration that is expected to take place given the pre-merger holdings of BGI and BlackRock funds,
everything else equal. It is defined as the square of combined ownership by BlackRock and BGI funds
minus the sum of squares of ownership by BlackRock funds and BGI funds (i.e., 𝐷𝐻𝐸𝑅𝐹𝑠 =
(𝐼𝑂 𝐵𝑅𝑠 + 𝐼𝑂 𝐵𝐺𝐼𝑠 )2 − 𝐼𝑂 𝐵𝑅𝑠2 − 𝐼𝑂 𝐵𝐺𝐼𝑠2 ). Both variables are measured as of June 2009 (i.e., prior to
the merger completion date) and kept constant for every stock s throughout the sample. We use both
continuous and discretized versions of those variables to assess robustness of our results. In the discretized
versions, we assign stocks to quintiles based on either 𝐼𝑂 𝐵𝑅 + 𝐵𝐺𝐼𝑠 or 𝐷𝐻𝐸𝑅𝐹𝑠 .
We then compute various measures of average portfolio rebalancing by residual funds for stock s. The
residual funds are defined as all funds in FactSet excluding BlackRock and BGI funds. For each stock s in
each semi-annual period t, we compute the average number of shares traded over the period divided by the
number of shares outstanding at the beginning of the period across all residual funds in FactSet and we
label this variable ΔSharesHeldst. As an alternative measure of portfolio rebalancing, we compute the
percentage of residual funds that increase their holdings in stock s in period t minus the percentage of
residual funds that decrease their holdings in the same stock over the same period and we label this
variable %NetBuyst. Both variables are defined on the basis of changes in the number of shares held16 rather
than portfolio weights to ensure that our tests on portfolio rebalancing are not confounded by return
differences across stocks.
C. Descriptive Statistics
In Table 1, we present descriptive statistics for the sample. In Panel A, we provide descriptive statistics
on the holdings coverage we can obtain for both BlackRock and BGI funds as of June 2009 (i.e., prior to

16

We factor out stock splits or other capital actions that may change the number of shares held in between
portfolio snapshots. In case a fund opens (closes) a position, we use the number of shares purchased (liquidated) in
these calculations.

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the merger) from FactSet. For BlackRock, we are able to include 308 different funds in the sample. Out of
these, only a small proportion is classified as “ETFs” (30), the rest are classified as non-passive products
(278), consistent with the perception that BlackRock was predominantly a manager of active investment
products prior to the merger. For BGI, we are able to include 333 funds, 302 of which are classified as
“ETFs” in FactSet and only 31 as non-ETFs, in line with the reasoning that BlackRock acquired BGI in
order establish a foothold in the fast-growing market for passive funds.
In terms of assets under management (“AUM”), our coverage of BlackRock funds represents almost
$160 billion as of June 2009. Compared to BlackRock’s annual report, these $160 billion represent about
79% of end-of-2008 equity assets under BlackRock’s custody. For BGI, we capture $306 billion in equity
AUM, representing about 31% of end-of-2008 equity assets under BGI’s custody. Focusing only on passive
AUM associated with ETFs (iShare funds), we capture $267 billion, or about 90% of the June 2009 equity
AUM of the iShares unit.
Given that we capture only about a third of all BGI equity AUM via FactSet, we perform a
reconciliation using 13F filings and describe the details in Section VII. In short, while we are able to cover
a larger fraction of total equity AUM of BGI via 13F filings (but a smaller fraction for BlackRock AUM),
this data source is less suitable for our analysis for two main reasons. First, our analysis draws its power
from the global cross-section of stocks. Using 13F filings as the main source would result in a significant
reduction in the cross-section as most international stocks would not feature in the analysis. Second, our
hypothesis has testable restrictions that require disaggregated holdings information for different fund types.
13F filings are aggregated at the institution level which would prevent us from conducting these tests.
Nevertheless, in Section VII, we perform a reconciliation between our treatment variable constructed from
FactSet data and, alternatively, from 13F filings and find that our main results replicate.
In Panel B, we report the stock ownership covered by WorldScope, BlackRock and / or BGI funds
prior to the merger. As of June 2009, we have WorldScope information on 36,660 stocks worldwide; we
declare these stocks to be the world market portfolio for comparison and benchmarking purposes. 7,348
stocks are held by BGI funds prior to the merger (representing about 69% of world market capitalization),
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6,476 stocks are held by BlackRock funds prior to the merger (representing about 65% of world market
capitalization), and 5,497 stocks are held both by BlackRock and BGI funds prior to the merger
(representing about 63% of world market capitalization), all according to the holdings that we can capture
via FactSet. The global 7,348 stocks held by BGI funds prior to the merger form the main sample on which
we perform our tests and we present robustness tests using the smaller sample of 5,497 stocks held both by
BlackRock and BGI funds (i.e., “overlapping stocks”) in the Internet Appendix.
In Panel C, we report average stock characteristics for all stocks in the WorldScope database and
separately for our sample of stocks held by BGI prior to the merger. Comparing with an average stock in
the complete WorldScope universe, we find that the average stock held by BGI is substantially larger, with
a higher level of overall institutional ownership (and by extension more heavily traded and liquid,
unreported), and more profitable. In terms of the other reported characteristics, the average stock held by
BGI are not substantially different from the average stock in WorldScope in terms of book-to-market, past
return, dividend yield, leverage, or cash holdings.
When we dissect our sample along our main treatment variable 𝐼𝑂 𝐵𝑅 + 𝐵𝐺𝐼𝑠 , we first highlight the
contribution of the combined BlackRock and BGI ownership to total institutional ownership as measured
by FactSet data. In our full sample, average pre-merger ownership by BlackRock and BGI amounts to 1.5%
(which represents almost 7% of total institutional ownership). Dissecting the full-sample average across
quintiles, we find that the contribution of BlackRock and BGI to total institutional ownership increases
substantially: for the lowest quintile, the combined ownership hardly contributes to total institutional
ownership but for the highest quintile, the combined ownership amounts to 10% of total institutional
ownership ( = 4.2% / (4.2% + 37.5%)). For the stocks in the highest quintile, these combined ownership
figures imply that expected ownership concentration (i.e., our variable 𝐷𝐻𝐸𝑅𝐹𝑠 which measures the
expected change in the HHI) increases by about 8.5%, ceteris paribus.
When we examine stock characteristics across quintiles, we find differences. Perhaps unsurprising, the
combined BlackRock-BGI ownership is positively correlated with total residual ownership: we observe a
monotonic increase of residual ownership from 8.1% in the bottom to 37.5% in the top quintile of 𝐼𝑂 𝐵𝑅 +
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𝐵𝐺𝐼𝑠 . By extension, combined ownership also seems related to other stock characteristics (e.g., size, bookto-market, past return, etc.), hence we take great care in our empirical specifications to not only control for
these characteristics but also to allow for period-specific effects that are related to them.

III.

Peer Effects: Portfolio Rebalancing by Other Funds

A. First Result
We start by investigating if funds other than the funds managed by BlackRock or BGI respond to the
merger via portfolio rebalancing. Our hypothesis predicts that if portfolio managers take into account the
expected increase in ownership concentration and, by extension, future stock price fragility, they will
rebalance their portfolios away from affected stocks to manage that risk.
We estimate equation (1) at the semi-annual frequency and use as outcome variables the two measures
of portfolio rebalancing (i.e., Δ𝑆ℎ𝑎𝑟𝑒𝑠ℎ𝑒𝑙𝑑𝑠𝑡+1 or %𝑁𝑒𝑡𝐵𝑢𝑦𝑠𝑡+1 ) and the treatment variables include
𝐼𝑂 𝐵𝑅 + 𝐵𝐺𝐼𝑠 (either in continuous form or discretized into quintiles) or alternatively 𝐷𝐻𝐸𝑅𝐹𝑠 .
We report the results in Table 2. Columns 1 and 2 present a baseline specification where the variable
𝑃𝑜𝑠𝑡𝑡 is equal to 1 for the two semi-annual periods following June 2009 and 0 otherwise. The results show
a negative coefficient on the interaction term between 𝐼𝑂 𝐵𝑅 + 𝐵𝐺𝐼𝑠 and 𝑃𝑜𝑠𝑡𝑡 implying that other funds
avoid stocks with high relative to low combined BlackRock and BGI ownership in the periods following
the merger announcement.17 This effect is significant at the 1% level and robust to using the discretized
treatment variable in Column 2.
In Columns 3 and 4, we evaluate the parallel trend assumption. We replace the 𝑃𝑜𝑠𝑡𝑡 indicator with 3
period-specific indicators, each highlighting one semi-annual period in the sample period (as in timeline 2
in Figure 1). In both columns, we find no effect in the period immediately preceding the merger
announcement (i.e., in period 𝑃𝑅𝐸1𝑡 ) suggesting that there is no difference in the trading behavior across
different levels of combined BlackRock and BGI ownership before the announcement relative to the

17

Note that the level-effects of both variables are absorbed by the fixed effects.

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(omitted) period 𝑃𝑅𝐸2𝑡 . Instead, we find that rebalancing is only significant after the merger announcement
and strongest in the period immediately following the merger announcement (i.e., in period 𝑃𝑂𝑆𝑇1𝑡 ). This
suggests that the parallel trend assumption is not violated in our setting. In economic terms, the change in
residual institutional ownership is about 7% lower in the highest relative to the lowest quintile of stocks
with combined BlackRock and BGI ownership (computed as (5 − 1) × 0.174, Column 4). The estimates
also show that this effect does not revert in the next period but instead continues albeit at a lower intensity.
The result replicates in a specification with the alternative treatment variable 𝐷𝐻𝐸𝑅𝐹𝑠 in Column 5.
In Columns 6 to 8 of the same table, we confirm this result using %𝑁𝑒𝑡𝐵𝑢𝑦𝑠𝑡 as an alternative
outcome variable and find that the difference in the fraction of funds reducing versus increasing their
position in stock s is 18% larger in the top relative to the bottom quintile of stocks with combined
BlackRock and BGI ownership in the period following the merger announcement (Column 7) and robust
for both definitions of the treatment (Column 8).
We conduct several robustness tests. In the interest of brevity, we report them in the Internet Appendix,
Table IA.2. First, we verify that the effects we document are concentrated among stocks held by both
BlackRock and BGI funds prior to the merger (“overlapping stocks”). For stocks held by BGI funds only,
we find no effects, suggesting that portfolio rebalancing by other funds is not related to the simple transfer
of ownership from BGI to BlackRock but instead by concerns about changes in ownership concentration.
Second, we provide a full set of specifications using the alternative treatment variable DHERFs. We find
that all the results are consistent with the ones reported in Table 2. Third, we investigate cross-sectional
differences in rebalancing intensity across stocks. In particular, we show that portfolio rebalancing of
residual funds is stronger for illiquid and small-cap stocks, consistent with the conjecture that concerns
about financial fragility are magnified for such stocks. Finally, we extend the sample window by an
additional 3 years but find no evidence of reversals in portfolio rebalancing in the periods after the merger
completion.

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B.

Main Result on Composition Effects: Analysis by Fund Type
Our testable restriction on portfolio rebalancing posits that concerns about future financial fragility are

magnified for funds with open-end structures (OEFs) because of the strategic complementarities these funds
may be subject to. We implement two tests and present the results in Table 3. The specifications in Panel
A are as in Table 2, only the outcome variables are aggregated separately over either OEFs (about 57% of
the underlying data) or Non-OEFs only (about 43% of the underlying data). In Columns 1 and 3, we find
that portfolio rebalancing away from stocks with high combined pre-merger ownership by BlackRock and
BGI funds is concentrated among OEFs. In contrast, Columns 2 and 4 show that the opposite is the case
for non-OEFs. These tests using the granular period indicators suggest that the previously documented
patterns of portfolio rebalancing are heavily concentrated in the sample of OEF funds and that the parallel
trend assumption is not violated – there is no significant difference in portfolio rebalancing of OEF funds
in period 𝑃𝑅𝐸1𝑠 relative to the (omitted) period 𝑃𝑅𝐸2𝑠 . We find the same result when we use the
alternative treatment variable 𝐷𝐻𝐸𝑅𝐹𝑠 in Column 5.
In contrast, the estimates in Columns 2 and 4 (but not 6) suggest that non-OEF funds rebalance towards
stock with high combined pre-merger ownership by BlackRock and BGI funds. In fact, the use of granular
period indicators and a sample with 4 periods suggests that for non-OEF funds, this is at least in part due
to a long term trend: the effect is significant already prior to the merger announcement.
We further examine this change in the composition of institutional ownership. We extend the sample
period from 4 to 20 semi-annual periods (i.e., the sample period now runs from 2004 to 2014) in order to
better evaluate potential long-term trends or post-event reversals. We keep the specification as in Table 3,
Panel A, Columns 3 and 4 but allow the relationship between 𝐼𝑂 𝐵𝑅 + 𝐵𝐺𝐼𝑠 and Δ𝑆ℎ𝑎𝑟𝑒𝑠𝐻𝑒𝑙𝑑𝑠𝑡+1 to vary
in every semi-annual period by including interaction terms between every period indicator and the treatment
variable (and corresponding interactions with all other controls, as before).
We display the time-series of these coefficient estimates including their confidence interval in Figure
2. Panel A focusses on the sample of OEF funds. We find no significant interaction terms in all the periods

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prior to the merger announcement (the black line is entirely flat). This provides yet more evidence that the
parallel trend assumption is likely met. As in the regressions before, we find a sharp drop and a significant
negative interaction effect in the event period that remains significantly negative for about 3 semi-annual
periods and then abates and becomes again insignificant.
Panel B of Figure 2 presents the same result but for the complementary sample of non-OEF funds. As
in Panel A, we find no significant interaction terms in the periods prior to the merger announcement.
However, the specification in the longer panel does suggest a positive response from non-OEF funds around
the merger announcement that is, however, nosier than and not as distinct as in the sample of OEFs. As in
Panel A, the effect again abates post-2010. This evidence suggests that at least part of the rebalancing of
OEFs is accommodated by non-OEFs. We can only speculate that since the coverage of FactSet is less
complete when it comes to non-OEFs as these have generally less stringent reporting requirements
compared to OEFs (we have relatively less coverage of e.g., pension funds), we have more measurement
error in this particular sub-sample which could explain the nosier results.
These results suggest that the composition of residual institutional ownership changes following the
merger announcement. Therefore, in the next test, we use as dependent variable 𝑂𝐸𝐹 𝐼𝑂𝑠𝑡+1 , defined as the
shares of stock s held by OEFs in period t+1 divided by shares outstanding and present the results in Table
3, Panel B. We indeed find that the level of OEF ownership drops for stocks in the highest relative to the
lowest quintile of pre-merger combined ownership by BlackRock and BGI. The estimates in Column 2
suggest that this drop amounts to about 70 bps. This corresponds to about 3% of the pre-merger OEF
ownership for stocks in the highest quintile combined BlackRock-BGI ownership or about 6.2% of a
standard deviation of the outcome variable. Furthermore, the effect is detectable only after the merger
announcement but not before. As before, the effect does not revert in the subsequent period and is equally
present when we use the alternative treatment variable 𝐷𝐻𝐸𝑅𝐹𝑠 in Column 3.
To illustrate that this drop in OEF ownership is associated with a change in the composition in
institutional ownership (rather than a drop in total institutional ownership), we use total institutional
ownership as the dependent variable in Columns 4 to 6 of the same panel. The estimates show that total
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institutional ownership does not change following the merger announcement, indicating that institutional
ownership is reallocated following the merger announcements, away from funds with a high exposure to
future financial fragility (i.e., OEFs) and towards funds with a lower exposure (i.e., Non-OEFs). As before,
we present robustness tests of these results with a complete set of estimates that use the alternative treatment
variable 𝐷𝐻𝐸𝑅𝐹𝑠 or the sample of overlapping stocks only in the Internet Appendix, Table IA.3. All the
results replicate under this alternative specification.
C.

Cross-sectional Heterogeneity among OEFs
Guided by the results from the previous subsection that show stronger rebalancing by OEFs, we

examine the cross-section of OEFs in order to investigate which fund characteristics are related to more
rebalancing within this subgroup of investors. Drawing from the theoretical considerations of both
Greenwood and Thesmar (2011) and Chen, Goldstein, and Jiang (2010), we hypothesize that specific fund
characteristics are associated with a larger exposure to changes in expected ownership concentration and,
by extension, stock price fragility. As such, we expect these fund characteristics to be associated with more
aggressive portfolio rebalancing.
We expand our sample and estimate equation (1) at the fund-stock-period level. We only include OEFs
in this test in order to examine which ones rebalance the most. Specifically, we estimate:
Δ𝑆ℎ𝑎𝑟𝑒𝑠𝐻𝑒𝑙𝑑𝑓𝑠𝑡+1 = 𝛽1 𝛼𝑡 × 𝑇𝑠 × 𝐶𝑓𝑠 + 𝛽2 𝛼𝑡 × 𝑇𝑠 + 𝛽3 𝛼𝑡 × 𝐶𝑓𝑠 + 𝛽4 𝑇𝑠 × 𝐶𝑓𝑠
(2)
+𝛾1′ (𝛼𝑡 × 𝑋𝑠𝑡 × 𝐶𝑓𝑠 ) + 𝛾2′ 𝑋𝑠𝑡 + 𝛾3′ 𝐶𝑓𝑠 + 𝛼𝑡 + 𝛼𝑠 + 𝛼𝑓 + 𝜖𝑓𝑠𝑡+1 .
Apart from the expansion, we augment the specification with a vector of fund characteristics 𝐶𝑓𝑠
(described below) all of which are measured as of June 2009 and, for easier interpretation, converted into
indicators equal to 1 for values above the median and 0 otherwise. We now focus on the triple interaction
terms between these characteristics and the previous interaction between the treatment variable (denoted
by 𝑇𝑠 in the equation) and the various period indicators (now abbreviated by the vector of period fixed
effects 𝛼𝑡 ). As before, we include time-varying stock-level control variables in the vector 𝑋𝑠𝑡 including all

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interaction terms 18 between these controls, the period indicators 𝛼𝑡 as before, and the additional fund
characteristics in 𝐶𝑓𝑠 to take into account that the treatment may be correlated with other stock
characteristics. We further augment the specification with additional fund fixed effects (the vector 𝛼𝑓 ). All
other specifications are unchanged.
We categorize funds along three dimensions in the vector 𝐶𝑓𝑠 to capture their exposure to future
fragility. First, the correlation structure of fund flows. An OEF whose flows are highly correlated with the
flows of other OEFs holding the same stock will face a higher exposure to changes in stock price fragility
and is therefore expected to rebalance more strongly away from the same affected stocks. To capture this
intuition, we compute two measures: 𝐹𝐶𝑂𝑅𝑅 𝑅𝑒𝑠𝑖𝑑𝑢𝑎𝑙𝑓 is the position-weighted average correlation
between flows to fund f and flows to all other funds (excluding BlackRock and BGI funds) that also hold
the stocks in the portfolio of fund f;19 𝐹𝐶𝑂𝑅𝑅 𝐵𝑅/𝐵𝐺𝐼𝑓 is the average correlation of flows to fund f and all
BlackRock and BGI funds. The flow correlations of all fund pairs are estimated using the two years of
monthly fund flows prior to June 2009.
Second, the overall exposure to the affected stocks. We expect that funds who generally have large
and concentrated positions in the affected stocks to be more exposed to future stock price fragility and
therefore rebalance more aggressively. To capture this, we use 𝐸𝑋𝑊𝐸𝐼𝐺𝐻𝑇𝑓𝑠 , defined as the weight of
fund f in stock s in excess of the benchmark.20 As a second measure, we compute 𝐶𝑂𝑁𝐶𝑓 as the HHI over
all stock holdings in the portfolio of fund f.
Third, following Chen, Goldstein, and Jiang (2010), we conjecture that exposure to changes in
expected ownership concentration is an elevated concern for funds with illiquid portfolios as they may be
subject to more severe strategic complementarities should they face outflows. We define 𝐼𝐿𝐿𝐼𝑄𝑓 as the

18

The estimated regression includes all double and triple interaction terms between 𝛼𝑡 , 𝑋𝑠𝑡 , and 𝐶𝑓𝑠 . To conserve
space, we only write one “catch all” vector of interaction terms in the regression equation.
19
Specifically, for every stock s in the portfolio of fund f, we first compute the simple average correlation of the
flows to fund f and all other funds holding stock s. We then aggregate these average correlations to the fund-level by
taking a position-weighted average across all stocks in the portfolio of fund f.
20
The benchmark weight is inferred from the average portfolio weight of all physical replication ETFs in FactSet
that track the benchmark index of fund f, as in Cremers et al. (2016).

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average portfolio illiquidity measured via the inverse of the average market capitalization across all stocks
in the portfolio of fund f as in Chen, Goldstein, and Jiang (2010).
We report the results in Table 4. In Column 1, we add the two variables characterizing the flow
correlation structure of fund f. We indeed find that funds with above-median flow correlations rebalance
more aggressively away from stocks with a high pre-merger combined ownership of BlackRock and BGI.
Both measures of the correlation structure of fund f deliver negative triple interaction terms. In Column 2,
we include the two measures that capture the overall exposure of fund f to the affected stocks and find that
funds with a positive excess weight in stock s and funds with an overall high level of portfolio concentration
rebalance away from affected stocks more aggressively compared to funds that underweight stock s or hold
more diversified portfolios. In Column 3, we include the measure of the overall level of portfolio illiquidity
of fund f and find that funds with illiquid portfolio rebalance more aggressively compared to funds with
more liquid portfolio holdings.
Finally, Column 4 presents the joint specification that includes all of these fund characteristics and we
find these results to be jointly robust. We also point out that with the exception of the variable 𝐶𝑂𝑁𝐶𝑓 , all
of these effects are only significant in the period following the merger announcement (i.e., in period
𝑃𝑂𝑆𝑇1𝑡 ) but not in the period before (the interactions for period 𝑃𝑅𝐸1𝑡 are insignificant) giving again no
indication that the parallel trend assumption is violated but that funds respond discretely in this particular
time period. In Column 5 we present a joint specification with the alternative treatment variable 𝐷𝐻𝐸𝑅𝐹𝑠
and as before, we present additional robustness tests in Table IA.4 in the Internet Appendix.
All in all, the results in this section support our hypothesis that fund managers are aware of both stock
price fragility and the possible strategic behavior of other investors and therefore take strategic actions exante to manage their exposure to expected changes in financial fragility induced by the merger. This is
especially so when they face an elevated exposure due to the institutional structure of their fund and the
characteristics of their holdings and flows.

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D.

Additional Tests
As a final exercise, we consider additional tests and start with one in particular to address a lingering

critique. While all our regressions control for time-varying impacts of stock characteristics other than the
combined pre-merger ownership of BlackRock and BGI, the descriptive statistics have shown that
BlackRock / BGI ownership is correlated with overall institutional ownership. In particular, the nature of
the BlackRock-BGI merger is such that the holdings of BGI aggregate the holdings of iShares ETFs. This
could give rise to the possibility that the rebalancing of OEFs is not necessarily driven by the combined
ownership of BlackRock and BGI funds but is instead a period-specific move away from stocks with
generally high ETF ownership.
We address this concern head-on by augmenting our tests for the expanded sample of OEF funds with
additional controls for the ETF ownership in each stock as of June 2009. If our results are indeed driven by
the combined ownership of BlackRock and BGI funds, the institutional ownership due to other ETF
providers should not affect our estimates. We construct three measures of residual ETF ownership which
we subsequently add to the regression to evaluate if portfolio rebalancing is driven by those additional
variables: first, the total residual passive ownership as of June 2009; second, the institutional ownership
due to Vanguard funds; third, the institutional ownership due to the top 3 ETF providers other than BGI
(i.e., Vanguard, StateStreet, and Societe Generale).
We present the results in Table 5. We repeat the specifications from Table 3, Panel A, Columns 1, 3,
and 5 that show how rebalancing is driven by OEFs but augment the specification with the different controls
for residual passive ownership (including interactions with the various period indicators). We find that (i)
the point estimates on the interactions between the period indicators and our treatment variables are little
affected by this specification change and (ii) the coefficient estimates on these control variables show no
clear pattern of significance that would suggest that the estimated treatment effects are instead related to

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passive ownership in general.21 As before, we present additional robustness tests in the Internet Appendix,
Table IA.5: We use different versions of the treatment variable, the sample of overlapping stocks only or
the expanded sample employed in Table 4 but find similar results throughout. We also present placebo tests
in which we omit the treatment variable and include only the control variable for passive residual ownership
and find that this does not produce the same difference-in-difference result. As such, we conclude that the
rebalancing we document in this section is not due to a period-specific effect in which active funds, for
unobservable reasons, rebalance away from stocks with high passive ownership.
We also include a second set of placebo tests in the Internet Appendix, Table IA.6. These tests use two
placebo event periods. Specifically, we set the event period 1 or 2 years before the event (June-December
2008 or June-December 2007). In all the tests, we find no significant results suggesting that the event period
from June-December 2009 is indeed the relevant one.

IV.

Stock Market Effects: Returns and Liquidity
We turn to our second testable restriction and examine whether the reallocation of institutional

ownership away from OEFs has measurable effects on stock returns and liquidity.
A.

Return Effects
We first examine abnormal stock returns. We implement a series of short-run event studies at the daily

frequency around key dates in the merger process. We conduct the analysis at the daily frequency to sharpen
our identification and test if market participants likely revise their expectations precisely around those dates
where our hypothesis predicts they would. This added precision also alleviates any remaining concerns
about long-term trends driving the results documented so far.
We define two key moments in the evolution of the merger: the merger announcement on June 11,
2009 and the antitrust approval by the European Commission on September 23, 2009. Both dates constitute

21

In unreported tests, we also confirm that specifications without the treatment variable but only the control
variables for passive residual ownership do not deliver the same result as the specifications with the treatment variable.

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significant changes to the probability that the deal will ultimately complete (which it did on December 1,
2009). We then examine daily abnormal returns around these event dates in a first step.
In Panels A and B of Table 6, we report simple univariate quintile sorts of daily abnormal returns on
a two day event window (including the event day and the following trading day, labeled days 0 and 1) for
both versions of our treatment variable. Across return measures and event dates, we find that daily abnormal
returns are (largely monotonically) decreasing across the quintiles of our treatment variables 𝐼𝑂 𝐵𝑅 + 𝐵𝐺𝐼𝑠
and 𝐷𝐻𝐸𝑅𝐹𝑠 . Across both panels, abnormal returns are between 23 bps to 1.4% lower per day in the highest
relative to the lowest quintile (implying a negative cumulative abnormal return over those two trading days
between 0.5% and 2.8%), all of which statistically significant, which provides first evidence on the price
impact of the expected increase in ownership concentration.
To assess if these univariate results are robust in a multi-variate specification, we estimate daily event
studies in a panel framework with a symmetric 20 trading sample around the event (i.e., including the 20
trading days before and after the event day which is set as day 0). Specifically, we estimate:
𝐴𝑅𝑠𝑡 = 𝛽1 𝐸𝑡 × 𝑇𝑠 + 𝛽2 𝐸𝑡 × 𝑃𝑎𝑠𝑠𝑖𝑣𝑒 𝑅𝑒𝑠𝑖𝑑𝑢𝑎𝑙 𝐼𝑂𝑠 + 𝛾1′ (𝐸𝑡 × 𝑋𝑠 )
(3)
+𝛼𝑡 + 𝛼𝑠 + 𝑇𝑂𝑀𝑐𝑡 + 𝑇𝑂𝑊𝑐𝑡 + 𝜖𝑠𝑡 ,
where the vector 𝐸𝑡 includes indicator variables for different time windows in the sample which are
interacted with our treatment variable 𝑇𝑠 : [-5,1] is an indicator equal to 1 for the 5 trading days prior to the
respective event date and 0 otherwise (to assess if prices already move prior to the announcement), [0,1] is
an indicator equal to 1 for the 2 trading days in the event window and 0 otherwise (the same days as in the
univariate tests), [2,6] is an indicator equal to 1 for the 5 trading days following the event window and 0
otherwise (to test for short-run reversals or continuation immediately following the event), and [7,20] is an
indicator equal to 1 for all remaining trading days after day 6 and 0 otherwise (to test for longer-run reversals
or continuation). All the regressions control for institutional ownership by passive funds other than those
of BGI affiliated funds and stock characteristics as in Table 5. As before, the regressions include the
interaction terms between the control variables with the different event indicator variables. To ensure that

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our estimates are not influenced by micro-structure issues, we further include country-specific indicators
for turn-of-the-month (equal to 1 for the first 3 trading days in a month and 0 otherwise, denoted 𝑇𝑂𝑀𝑐𝑡 )
and turn-of-the-week (equal to 1 for Mondays and 0 otherwise, denoted 𝑇𝑂𝑊𝑐𝑡 ). We draw inference from
standard errors that are double clustered by stock and trading day. All other specifications are unchanged.
For the merger announcement, the coefficients on the interaction term for the event window [0,1] retain
their magnitude compared to the univariate test in Panel A. However, the effects are sometimes statistically
insignificant and we report them in the Internet Appendix, Table IA.7. Hence, for the merger
announcement, the fully saturated panel specifications do not allow us to conclusively attribute these results
to the combined pre-merger ownership of BlackRock and BGI.
However, when we conduct the same test for the antitrust-approval event in Panel C of Table 6, we
find statistically significant price responses exactly on and following the antitrust approval announcement
(significant at the 1% level). Moreover, the magnitudes of the coefficients on the interaction term between
indicator [0,1] and 𝐼𝑂 𝐵𝑅 + 𝐵𝐺𝐼𝑠 is almost identical to the simple univariate result in Panel A. For
example, for local-market adjusted returns (Column 2), we measure a daily spread between the highest and
the lowest quintile of 4 × 11.4 𝑏𝑝𝑠 = 45.6 𝑏𝑝𝑠 per day which is almost identical to the 49.4 bps per day
documented in Panel A. For DGTW-adjusted returns (Column 3), the panel regressions estimate a
differential price response of 24 bps per day between the top and the bottom quintile (compared to 25 bps
per day measured in Panel A). Specifications with the alternative treatment variable in Columns 4 to 6
deliver similar estimates. These results suggest that market participants were uncertain about the regulatory
outcome and started fully pricing it in only after the regulatory approval.
Panel C documents a number of additional results. First, we detect no evidence of a price drift in the
week prior to the antitrust approval date (the coefficient on the interaction term with indicator [-5,-1] is
insignificant), again giving no reason to believe that the parallel trend assumption is violated. Second, we
find some evidence that stocks in the high quintiles continue to experience lower returns in the week after
the antitrust approval is announced relative to stocks in the low quintiles (i.e., we find evidence of return
continuation for trading days [2,6] following the event). Third, we find no further return adjustments after
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about one week: abnormal returns are no different in the window [7,20]. This also means that we find no
evidence of return reversals in the 4 weeks following the antitrust approval. Fourth, as before, we find that
our controls for passive residual ownership are statistically insignificant.
We perform additional placebo tests. So far, we have focused on two event dates which seem important
in light of our hypothesis. However, the discussion of the BlackRock-BGI merger in Section I has
highlighted a number of merger-related announcements not all related to BlackRock per se. In an effort to
perform falsification tests, we examine abnormal returns around all of those dates. Specifically, we focus
on the announcement from Barclays that BGI is for sale (March 16, 2009), the announcement that the
private equity firm CVC would acquire BGI (April 9, 2009), the expiration of the go-shop provision with
CVC (June 18, 2009), and the deal completion date (December 1, 2009).22 The first three dates should be
irrelevant under our hypothesis as they do not relate to BlackRock. The deal completion date could be
relevant (in case some market participants still had considerable doubts after the antitrust approval) but is
of additional interest to evaluate if returns e.g., revert only after the deal completes. We estimate equation
(3) around these 4 alternative event dates and present the results in the Internet Appendix, Table IA.7. In
short, we find no significant result across any of these (placebo) dates which gives further credence to our
interpretation that market participants took strategic actions precisely around those dates where our
hypothesis predicts they would.
These results corroborate our hypothesis that the aggregate portfolio rebalancing and the reallocation
of institutional ownership away from OEFs has negative return effects on the affected stocks. As before,
we present additional robustness tests using the alternative treatment variable 𝐷𝐻𝐸𝑅𝐹𝑠 , the sample of
overlapping stocks, and alternative controls for residual institutional ownership in Table IA.7. All tests
support the ones presented here.

22

If the 20-day symmetric sample window of one event overlaps with another event date (before or after), we
exclude the 2 trading days of the other event in the estimation in order to avoid a contamination of one event study
with another event.

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B.

Liquidity Effects
Given the lack of price reversals, we now test an extended prediction if the merger had any effect on

stock liquidity. We speculate that the change in composition in institutional ownership away from OEFs is
accompanied with a deterioration in liquidity as non-OEF funds (e.g., pension and insurance funds) have
longer investment horizons and potentially trade less frequently which could negatively impact stock
liquidity. To test this hypothesis, we estimate the following regression, at the daily frequency:
𝐿𝑖𝑞𝑢𝑖𝑑𝑖𝑡𝑦𝑠𝑡 = 𝛽1 𝐸𝑡 × 𝑇𝑠 + 𝛽2 𝐸𝑡 × 𝑃𝑎𝑠𝑠𝑖𝑣𝑒 𝑅𝑒𝑠𝑖𝑑𝑢𝑎𝑙 𝐼𝑂𝑠 + 𝛾1′ (𝐸𝑡 × 𝑋𝑠 )
(4)
+𝛼𝑡 + 𝛼𝑠 + 𝑇𝑂𝑀𝑐𝑡 + 𝑇𝑂𝑊𝑐𝑡 + 𝜖𝑠𝑡 .
We use three measures of stock liquidity: 𝐴𝑚𝑖ℎ𝑢𝑑𝑠𝑡 is the Amihud (2002) measure of illiquidity that
we construct using daily stock returns and trading volume data, 𝐿𝑜𝑔𝑇𝑟𝑎𝑑𝑖𝑛𝑔𝑉𝑜𝑙𝑢𝑚𝑒𝑠𝑡 is the natural
logarithm of the number of shares traded multiplied by the previous day stock price, and 𝐿𝑜𝑔𝑇𝑢𝑟𝑛𝑜𝑣𝑒𝑟𝑠𝑡
is the natural logarithm of number of shares traded divided by shares outstanding.
All the other specifications are defined as in the return tests with two exceptions: first, we use a longer
and symmetric 60 trading day sample (i.e., 60 trading days before and after a given event day which is
labelled as day 0) in order to better evaluate changes in the level of liquidity across stocks. Second, for
every event date that we consider, we use as the pre-event period the 60 trading days prior to the first event
date (i.e., the 60 trading days prior to the announcement that BGI is for sale in March 2009) in order to
evaluate if stock liquidity is higher or lower compared to a period that is not affected by the merger.23
We report the results in the remaining panels of Table 6. Panel D displays the estimates when liquidity
is measured by 𝐴𝑚𝑖ℎ𝑢𝑑𝑠𝑡 and Panel E when liquidity is measured by 𝐿𝑜𝑔𝑇𝑟𝑎𝑑𝑖𝑛𝑔𝑉𝑜𝑙𝑢𝑚𝑒𝑠𝑡 . To conserve
space, we present the results when liquidity is measured by 𝐿𝑜𝑔𝑇𝑢𝑟𝑛𝑜𝑣𝑒𝑟𝑠𝑡 in the Internet Appendix. In
all panels, we present specifications for both versions of the treatment variable. Every column displays the
event study panel specification for a different event date, starting with the announcement that BGI is for
sale. We find no evidence that stock liquidity decreases after the announcement that BGI is for sale

23

We exclude trading days that overlap with the event window of an adjacent event.

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(Columns 1 and 5): liquidity is generally no different after this event compared to before. However, Panel
D shows that liquidity starts deteriorating after the merger announcement by BlackRock in June 2009
(Column 2 and 6). In Panel E, the effect is robustly significant only after the merger completion date. In no
case do we find evidence that liquidity reverts and improves again after the deal completes (Columns 4 and
8). In economic terms, comparing stocks in the highest relative to the lowest treatment quintile, we find a
permanent drop in stock liquidity of 0.05 to 0.13 standard deviations over the course of the merger process
depending on the specification.

V.
A.

Impact on Stock Price Fragility and Volatility
Impact on Fragility
We now examine if stock price fragility increases ex post. As discussed, our tests are cast in terms of

expected changes in stock price fragility which trigger strategic responses by OEFs in particular. As such,
given that funds with the largest exposure to expected future fragility appear to rebalance the most (which
we show to lead to change in the composition of institutional ownership for affected stocks), it is not clear
whether realized fragility will ultimately increase, decrease, or stay constant because individual funds may
not be able to fully take into account how their individual rebalancing affects the aggregate outcome (e.g.,
because there is a lack of coordination).
To investigate this issue, we first compute the measure of stock price fragility from Greenwood and
Thesmar (2011) but use asset management firm-level flow and holdings information as discussed in the
introduction. Other than that, we follow exactly the steps of the original authors which means that this
measure is ultimately based on holdings and flow information from OEFs for which monthly flow data to
estimate the variance-covariance matrix of flows of all owners of stock s in period t is readily available. As
acknowledged in Greenwood and Thesmar (2011), this version of fragility only captures the fragility
associated with one particular subset of institutional investors (i.e., open-end funds) and we highlight this
explicitly in the variable name 𝐹𝑟𝑎𝑔𝑖𝑙𝑖𝑡𝑦 (𝑂𝐸𝐹 𝑜𝑛𝑙𝑦)𝑠𝑡 . Following the original authors, we use the square

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root of all fragility variables in our tests and we also decompose the variable into the terms that capture the
impact of ownership concentration and flow volatility (labelled 𝐹𝑟𝑎𝑔𝑖𝑙𝑖𝑡𝑦 (𝑑𝑖𝑎𝑔𝑜𝑛𝑎𝑙 )𝑠𝑡 ) and the terms
that capture the impact of the correlation of flows only (labelled 𝐹𝑟𝑎𝑔𝑖𝑙𝑖𝑡𝑦 (𝑜𝑓𝑓 − 𝑑𝑖𝑎𝑔𝑜𝑛𝑎𝑙 )𝑠𝑡 ).24
Our results on portfolio rebalancing show that OEFs in particular rebalance away from affected stocks
which leads to a change in the composition in institutional ownership. As far as stock price fragility is
concerned, since OEFs become relatively less prominent in the ownership structure of affected stocks, true
stock price fragility could respond differently compared to stock price fragility associated with OEF
ownership only. To examine if this is the case, we compute a second version of stock price fragility which
we label 𝐹𝑟𝑎𝑔𝑖𝑙𝑖𝑡𝑦 (𝐴𝑙𝑙 𝑓𝑢𝑛𝑑𝑠)𝑠𝑡 . The variable is calculated just as 𝐹𝑟𝑎𝑔𝑖𝑙𝑖𝑡𝑦 (𝑂𝐸𝐹 𝑜𝑛𝑙𝑦)𝑠𝑡 with the
main difference that we include holdings and flows from all fund types in FactSet, not just OEFs, in order
to capture this composition effect.
The main empirical challenge we face in this exercise is that we do not observe monthly flows for all
funds as we do for OEFs. To solve it, we infer semi-annual flows for each fund from semi-annual fundlevel AUM and semi-annual holding returns that we can compute for all funds. We estimate flows using
the standard formula 𝐹𝑙𝑜𝑤𝑓𝑡 = (𝐴𝑈𝑀𝑓𝑡 − 𝐴𝑈𝑀𝑓𝑡−1 × 𝐻𝑅𝑓𝑡 )/𝐴𝑈𝑀𝑓𝑡−1 , where 𝐻𝑅𝑓𝑡 denotes semiannual holding returns from period t-1 to t of all stocks held in the portfolio of fund f. As before, we then
aggregate this information to the firm-level, compute 𝐹𝑟𝑎𝑔𝑖𝑙𝑖𝑡𝑦 (𝐴𝑙𝑙 𝑓𝑢𝑛𝑑𝑠)𝑠𝑡 and also decompose this
second measure of stock price fragility into its diagonal and off-diagonal elements.
Before examining how these two versions of stock price fragility respond to the merger, we perform a
validation test. We replicate the main result of Greenwood and Thesmar (2011), the positive relationship
between return volatility and stock price fragility and perform a horse race between these two measures of
stock price fragility. We present the results in the Internet Appendix, Table IA.8. We find that when used
separately, both versions of stock price fragility are positively associated with future stock return volatility
(Columns 1 and 2), consistent with the original authors. However, when we include them jointly (Column

24

This decomposition is as in Greenwood and Thesmar (2011, equation 4).

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3), we find that √𝐹𝑟𝑎𝑔𝑖𝑙𝑖𝑡𝑦(𝐴𝑙𝑙 𝑓𝑢𝑛𝑑𝑠)𝑠𝑡 wins the horse race and retains the positive and significant
relationship with stock return volatility while √𝐹𝑟𝑎𝑔𝑖𝑙𝑖𝑡𝑦(𝑂𝐸𝐹 𝑜𝑛𝑙𝑦)𝑠𝑡 turns statistically insignificant.
The effect is robust to different fixed effect specifications (Column 4) and stronger when we use
idiosyncratic stock return volatility (rather than total volatility which partly captures exposure to factor
volatility) as the dependent variable (Column 5). In Column 6, we further confirm Greenwood and Thesmar
(2011) and show that 𝑂𝐸𝐹 𝐼𝑂𝑠𝑡 as an additional explanatory variable is insignificant in the presence of
√𝐹𝑟𝑎𝑔𝑖𝑙𝑖𝑡𝑦 (𝐴𝑙𝑙 𝑓𝑢𝑛𝑑𝑠)𝑠𝑡 . As such, we conclude that our alternative measure of stock price fragility that
includes holdings and flow information of all fund types is a valid and perhaps more comprehensive
measure of stock price fragility.25
We then perform our main tests and investigate if and how stock price fragility changes over the course
of the BlackRock-BGI merger. We implement the same difference-in-difference test as before, use our
measures of stock price fragility (and their decompositions) as dependent variables and present the results
in Table 7 for both versions of our treatment variable.
Column 1 of Panels A and B in Table 7 documents that stock price fragility associated with OEF
ownership only indeed increases following the merger announcement (but not before), consistent with the
rebalancing of OEFs. Columns 2 and 3 decompose the overall increase of √𝐹𝑟𝑎𝑔𝑖𝑙𝑖𝑡𝑦 (𝑂𝐸𝐹 𝑜𝑛𝑙𝑦)𝑠𝑡 into
the components affected by ownership concentration and flow volatility (Column 2) and the components
affected by flow correlations (Column 3) and show that both components increase.
In Columns 4 to 6 of the same panels, we perform the same test for √𝐹𝑟𝑎𝑔𝑖𝑙𝑖𝑡𝑦 (𝐴𝑙𝑙 𝑓𝑢𝑛𝑑𝑠)𝑠𝑡 and
find the opposite result. Stock price fragility inferred from holdings and flows of all fund types in FactSet
drops following the merger announcement (but again, not before). The effect is significant at the 1% level,
driven by both diagonal and off-diagonal components of stock price fragility (Columns 5 and 6), and robust

25

In unreported tests, we use mutual fund flows to examine how well holding-based flows approximate for flows
estimated from total fund returns and AUM and find the correlation between holdings-based flows and “true” flows
to be approximately 74%.

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for both versions of our treatment variable (Panels A and B). 26 As such, the rebalancing of OEFs in
particular who respond to an increase in expected fragility once the merger is announced ultimately leads
to a drop in realized stock price fragility as the compositional effect associated with this behavior leads to
lower OEF ownership in affected stocks and higher ownership by non-open-end funds. In economic terms,
we find that for stocks in the highest quintile of e.g., 𝐼𝑂 𝐵𝑅 + 𝐵𝐺𝐼𝑠 relative to stocks in the lowest quintile,
√𝐹𝑟𝑎𝑔𝑖𝑙𝑖𝑡𝑦 (𝐴𝑙𝑙 𝑓𝑢𝑛𝑑𝑠)𝑠𝑡 drops by about 4 × 0.0085 = 0.034 (Panel A, Column 4), which corresponds
to about 10.8% of a standard deviation of √𝐹𝑟𝑎𝑔𝑖𝑙𝑖𝑡𝑦 (𝐴𝑙𝑙 𝑓𝑢𝑛𝑑𝑠)𝑠𝑡 . In contrast, when only considering
stock price fragility associated with OEF ownership, we would have concluded that stock price fragility for
the same stocks increases by about 4 × 0.0022 = 0.0088 (Panel A, Column 1), which corresponds to about
13.1% of a standard deviation of the dependent variable √𝐹𝑟𝑎𝑔𝑖𝑙𝑖𝑡𝑦(𝑂𝐸𝐹 𝑜𝑛𝑙𝑦)𝑠𝑡 . As before, we present
robustness tests using the overlapped sample in the Internet Appendix, Table IA.9.
B.

Impact on Stock Volatility
Given the realized change in stock price fragility (increasing when only considering OEFs but

decreasing when considering all funds), the question arises if stock return volatility is impacted by the
merger. In light of our results that stock price fragility associated with all fund types decreases following
the merger announcement (in combination with our first validation tests that show this variable to be
significantly associated with stock return volatility), we would expect that the merger leads to a decrease in
stock return volatility.
We therefore test whether the combined ownership of BlackRock and BGI is associated with a
decrease in return volatility. We present the results in Table 7, Panel C where we implement the same panel
specification as before 27 and use as dependent variables either 𝑇𝑜𝑡𝑎𝑙𝑉𝑜𝑙𝑠𝑡 , defined as the annualized

26
In unreported tests, we confirm that the different dynamics in the fragility measures are driven by the
differences in the underlying sample of funds that are included in the computation and not by the method to estimate
flows. For example, we find that the measure of stock price fragility based on mutual fund ownership only but
computed using holdings-based flows delivers the same result as in Columns 1 to 3 in Table 7, Panels A and B.
27
The panel is now estimated at the monthly frequency as we estimate stock return volatility from daily returns
in each month. We present the same estimates on a semi-annual panel in the Internet Appendix, Table IA.9.

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standard deviation over daily total stock returns in month t for stock s, or 𝐼𝑑𝑖𝑜𝑠𝑦𝑛𝑐𝑟𝑎𝑡𝑖𝑐𝑉𝑜𝑙𝑠𝑡 , defined as
the annualized standard deviation over the residuals from a regression of daily total stock returns on
country-specific daily market, size, value, and momentum factors which we construct from the universe of
all stocks in the WorldScope database. We find that stock volatility decreases for stocks with high relative
to low combined BlackRock-BGI ownership following the merger announcement (but not before) and that
volatility does not recover following the completion of the merger. We confirm this result using both
versions of our treatment variable and present additional robustness test in the Internet Appendix, Table
IA.9. As such, the decline in realized return volatility is consistent with the decline in realized stock price
fragility when inferred from the holdings of all fund types.

VI.

Beyond BlackRock
In this section, we extend the analysis to a large sample of asset management mergers in the period

from 2002 to 2012. To separate the analysis from the impact of the BlackRock-BGI merger, we exclude
the period 2008 to 2010 from the analysis. While these other mergers are considerably smaller in magnitude
and scale, the analysis is helpful for at least two reasons. First, it clarifies to what extent the results from
the BlackRock-BGI merger generalize to a broader setting. Second, it addresses any residual concern that
the results we document are impacted by the financial crisis of 2008, the subsequent market recovery that
took place during the BlackRock-BGI merger period, or any long-term trends around that time.
We begin with the sample of asset management mergers in the period 2002 to 2012 from Luo, Manconi
and Schumacher (2020). These mergers are collected from the SDC Platinum and Zephyr-Bureau van Dijk
merger and acquisition databases and hand-matched to the FactSet ownership database. We restrict the
sample to majority acquisitions in the periods 2002 to 2007 and 2011 to 2012 and mergers with total
combined TNA of bidder and target of at least $50 million assets. This gives us 74 mergers between asset
managers for which we can collect holdings information from FactSet. The average target in these mergers
has $8.9 billion assets under management, the average acquirer has about $24.8 billion assets under
management, and the average combined institutional ownership of buyer and target funds is 0.33%,
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illustrating how much larger in impact the BlackRock-BGI transaction is in comparison with an average
deal in the industry.
We start our analysis by examining the portfolio rebalancing by residual funds around these asset
management mergers. The dependent variables Δ𝑆ℎ𝑎𝑟𝑒𝑠𝐻𝑒𝑙𝑑𝑠𝑑𝑡+1 and %𝑁𝑒𝑡𝐵𝑢𝑦𝑠𝑑𝑡+1 are defined dealby-deal as in Table 2. The sample includes, for a given deal d, all stocks held by at least one target fund and
the sample period covers the symmetric two semi-annual periods around the merger announcement date
which we treat as the period prior to the completion date, all as before. The estimated regression is:
Δ𝑆ℎ𝑎𝑟𝑒𝑠𝐻𝑒𝑙𝑑𝑑𝑠𝑡+1 = 𝛽1 𝑇𝑑𝑠 + 𝛽2 𝑃𝑜𝑠𝑡𝑑𝑡 + 𝛽3 𝑃𝑜𝑠𝑡𝑑𝑡 × 𝑇𝑑𝑠 + 𝛾1 ′(𝑃𝑜𝑠𝑡𝑑𝑡 × 𝑋𝑠𝑡 ) + 𝛾2 ′𝑋𝑠𝑡

(5)
+𝛼𝑡 + 𝛼𝑠 + 𝛼𝑑 + 𝜖𝑠𝑑𝑡+1 .

The main coefficient of interest is 𝛽3 on the interaction term between the deal-specific post-merger
indicator 𝑃𝑜𝑠𝑡𝑑𝑡 that is equal to 1 for the two semi-annual periods following the merger announcement of
deal

d

and

0

otherwise

(alternatively,

we

include

three

period-specific

indicators

𝑃𝑟𝑒1𝑑𝑡 , 𝑃𝑜𝑠𝑡1𝑑𝑡 , or 𝑃𝑜𝑠𝑡2𝑑𝑡 as before) and the treatment variable 𝑇𝑠 which we correspondingly define as
𝐼𝑂 𝐵𝑢𝑦𝑒𝑟 + 𝑇𝑎𝑟𝑔𝑒𝑡𝑑𝑠 or 𝐷𝐻𝐸𝑅𝐹𝑑𝑠 We further add deal fixed effects (𝛼𝑑 ), all other specifications are as
in Table 2.
We report the results in Table 8, Panel A. As for the BlackRock-BGI merger, we find that larger
combined ownership by buyer and target funds is related to more negative rebalancing by other funds
following the merger announcement. We confirm this result with the continuous treatment variable in
Column 1 or the discretized version in quintiles in Column 2. While these effects are significant at the 1%
level, we also observe that the economic magnitude of these estimates is an order of magnitude smaller.
Comparing the estimate of Column 2 here to its counterpart in Table 2, we find that that the equivalent
estimate for the BlackRock-BGI merger is almost 4 times larger.28 In Columns 3 and 4, we implement the
same test to evaluate if the parallel trend assumption is met as in Table 2. We replace the single 𝑃𝑜𝑠𝑡𝑑𝑡
indicator with 3 period-specific indicators, each highlighting one semi-annual period in the sample period

The coefficient estimate in Table 2, Column 2 is -0.0168, here is it – 0.0042. As such, for a 1 quintile change
in the treatment variable, the effect on portfolio rebalancing is -0.0168 / -0.0042 = 4 times larger in Table 2.
28

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(analogous to Table 2) and again find that residual funds only change their investment behavior following
the merger announcement but not before (the interactions with 𝑃𝑟𝑒1𝑑𝑡 are all insignificant). Hence, we find
again no evidence of a violation of the parallel trend assumption. In Column 5, we confirm the same result
using the alternative treatment variable 𝐷𝐻𝐸𝑅𝐹𝑑𝑠 . Finally, we use the alternative outcome variable
%𝑁𝑒𝑡𝐵𝑢𝑦𝑑𝑠𝑡 in Columns 6 to 8 and find again the same results. Further, we control for residual
institutional ownership across all columns but find the corresponding interaction terms largely insignificant,
confirming (as in the BlackRock-BGI case) that residual funds respond to the combined ownership of buyer
and target funds rather than an overall measure of institutional ownership around those times.
We then turn to stock market effects and test if we find the same negative effects on stock prices and
liquidity as before. For the BlackRock-BGI merger, we were able to fully reconstruct the evolution of the
merger process which allowed us to implement tests at the daily frequency. For the extended sample here,
we are unable to reconstruct the exact evolution of each merger in the same way. As such, we examine
stock market effects at the monthly frequency. In keeping with the analysis, we test for abnormal stock
returns already prior to the deal completion date. We focus on three specific periods. First, the months
following the deal completion date are labelled 𝐶𝑜𝑚𝑝𝑙𝑒𝑡𝑖𝑜𝑛𝑑𝑡 . Second, we label the three month period
before the completion date as 𝑀&𝐴 𝑃𝑟𝑜𝑐𝑒𝑠𝑠𝑑𝑡 . For the BlackRock-BGI merger, we found the most
significant stock market effects about three months prior to the deal completion. As we are unable to
reconstruct the exact dynamics of every other merger, we simply grant the same 3-month period prior to
the completion to every deal in order to test for abnormal returns or liquidity. Third, to again evaluate the
parallel trend condition, we label as 𝑃𝑟𝑒𝑑𝑡 the three month period prior to the months labelled as
𝑀&𝐴 𝑃𝑟𝑜𝑐𝑒𝑠𝑠𝑑𝑡 . We re-estimate Eq. (5) at the monthly frequency and use as dependent variables the same
measures of abnormal stock returns or liquidity. All other specifications are as before.
We present the results in Table 8, Panel B. In Column 1 to 3, we find negative abnormal stock returns
in the three months prior to the merger completion for the treatment variable 𝐼𝑂 𝐵𝑢𝑦𝑒𝑟 + 𝑇𝑎𝑟𝑔𝑒𝑡𝑑𝑠 : the
interaction terms between the combined ownership of buyer and target and the period indicator

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𝑀&𝐴 𝑃𝑟𝑜𝑐𝑒𝑠𝑠𝑑𝑡 are all negative and significant. We find no evidence of differential abnormal returns prior
to that (suggesting again that the parallel trend assumption is met) and no continuation or reversal in the
months following the merger completion - the interaction terms between the treatment variable and the
other period indicators are all insignificant. In Columns 4 and 5, we document the same negative effect on
stock liquidity. Columns 6 to 10 show the same results using the alternative treatment variable 𝐷𝐻𝐸𝑅𝐹𝑑𝑠 .
As before, we report additional robustness tests in the Internet Appendix, Table IA.10. Specifically,
we also provide placebo tests to show that the specification including only the control variable for passive
residual ownership (i.e., when omitting the treatment variable) does not deliver the same result. Also,
consistent with the results in Section V, we also find that realized stock price fragility increases when we
only include OEFs in computation of the measures but decreases when we include all fund types.
Consequently, we also find evidence that sock return volatility declines following asset management
mergers. Overall, this shows that the insights from the BlackRock-BGI transaction generalize to the broader
asset management industry and time-periods other than the years following the 2008 financial crisis.

VII. Further Discussion
This section provides additional discussion on potential alternative interpretations of our results and
additional robustness tests using 13F information.
A.

Alternative Interpretation: Concerns about Adverse Selection and Informed Trading
An alternative interpretation of our results posits that the behavior of other funds and the stock market

reaction are explained by an elevated concern about future adverse selection in stocks with a high combined
ownership of BlackRock and BGI. The transfer of ownership from Barclays to BlackRock places
BlackRock among the largest shareholders for a large number of portfolio firms, making the firm a large
insider. This could give BlackRock better access to firm-specific information that it may use to improve
the performance of its actively managed funds.

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Under this alternative explanation, we expect that other funds want to avoid stocks with a high
ownership concentration increase because they anticipate increased information asymmetries and adverse
selection for those stocks. In addition, since BlackRock funds would be better informed going forward, the
balance of informed versus noise traders could change. As a result, stocks would experience lower returns
and lower liquidity.
We assess this alternative and directly examine holdings-based performance of actively-managed
BlackRock funds to separate this interpretation from ours. The alternative predicts improved performance
by BlackRock funds following the merger, especially when these BlackRock funds hold stocks with high
pre-merger overlap between BlackRock and BGI. Specifically, we perform a fund-level test and examine
if BlackRock funds on average improve their performance once the merger is completed using the follow
regression specification:
𝐻𝑅𝐸𝑇𝑓𝑡+1 = 𝛽1 𝑃𝑜𝑠𝑡𝑡 + 𝛽2 𝐴𝑣𝑔 𝐼𝑂 𝐵𝑅 + 𝐵𝐺𝐼𝑓 + 𝛽3 𝑃𝑜𝑠𝑡𝑡 × 𝐴𝑣𝑔 𝐼𝑂 𝐵𝑅 + 𝐵𝐺𝐼𝑓
(6)
+𝛼𝑡 + 𝛼𝑓 + 𝜖𝑓𝑡+1 ,
where the dependent variable 𝐻𝑅𝐸𝑇𝑓𝑡+1 measures semi-annual holding returns (adjusted for risk via
different benchmark portfolios) and the main explanatory variable 𝐴𝑣𝑔 𝐼𝑂 𝐵𝑅 + 𝐵𝐺𝐼𝑓 is the (equally- or
holdings-value-weighted) average of our treatment variable 𝐼𝑂 𝐵𝑅 + 𝐵𝐺𝐼𝑠 across all stocks in the portfolio
of BlackRock fund f (Appendix A defines all variables in detail), 𝑃𝑜𝑠𝑡𝑡 is an indicator equal to 1 for the
two semi-annual periods following the merger announcement. We further include fund and period fixed
effects. The main coefficient of interest is 𝛽3 which this alternative hypothesis predicts to be positive: the
information advantage that active BlackRock fund f experiences is increasing in the combined ownership.
Hence, changes in fund performance should be positively related to 𝐴𝑣𝑔 𝐼𝑂 𝐵𝑅 + 𝐵𝐺𝐼𝑓 .
We report the results in the Internet Appendix, Table IA.11. In short, we find no relationship between
the holdings-based performance of BlackRock funds and the pre-merger combined ownership of
BlackRock and BGI across various performance measures and different specification choices.

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B.

Alternative Interpretation: Anticipated Trading by BlackRock funds
Yet another alternative interpretation of our results posits that the behavior of other funds is explained

by anticipated trading of BlackRock funds who may choose to scale down positions in stocks with high
combined BlackRock-BGI ownership after the merger for e.g., risk-management purposes. If so, other
funds could decide to avoid those stocks for at least some time in order to minimize a potential negative
price impact that could be associated with increasing divestures from BlackRock funds. While under this
alternative, the rebalancing of other funds is done in anticipation of a transitory selling motive by
BlackRock funds, all our results to this point have failed to uncover reversals of either portfolio rebalancing
or stock market effects, which should follow under this alternative. Nevertheless, we test explicitly if the
trading behavior of BlackRock funds is correlated with the combined BlackRock-BGI ownership and
present the results in the Internet Appendix, Table IA.12. We essentially implement the same tests as before
but use as dependent variable our measures of portfolio rebalancing but computed for BlackRock funds. In
the full sample, we find no evidence that post-merger trading of BlackRock funds is correlated with our
treatment variable. We further zoom in and investigate if BlackRock funds sell, for example, stock where
the combined ownership of BlackRock and BGI funds exceeds certain thresholds that would trigger
additional reporting (e.g., the subset of stocks where combined ownership exceeds 5% of shares
outstanding). However, we again find no evidence of abnormal trading of BlackRock funds for those stocks
following the merger announcement.
C. Robustness Tests with 13F Information
We perform another robustness test of our main results using institution-level holdings from 13F
filings to modify our treatment variable. We do this because our fund-level holdings in FactSet only capture
about one third of BGI equity AUM (when compared to the Barclays Annual Report). Given that BGI
ownership is an important ingredient for our treatment variable, we construct an alternative version from
13F holdings.

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We find that for BlackRock, we capture only $125 billion AUM as of June 2009 by using 13F filings
(i.e., we have better coverage of BlackRock holdings using FactSet data). In the case of BGI, while BGI is
not itself a filer in 13F, we can identify Barclays PLC and Barclays Bank as 13F filers. Combining these
two entities, we capture $530 billion AUM as of June 2009 for Barclays as a whole. Inspecting the timeseries of Barclays AUM in 13F, we observe a drop in AUM of about $643 billion over the course of 2010
with an almost symmetric increase in AUM for BlackRock in the same period, suggesting that a large
fraction of the reported Barclays AUM in 13F is indeed managed by BGI.
While 13F appears to have a larger coverage of total AUM compared to FactSet, we stress two main
reasons why we conduct the main analysis with FactSet. First, we are only able to cover 4,664 stocks with
Barclays holdings as of June 2009 via 13F while our sample based on FactSet ownership covers over 7,300
stocks. The difference is primarily on the international dimension that we would lose when restricting
ourselves to the 13F universe of stocks. Our econometric analysis draws its power from a large cross-section
of stocks that are affected by the merger to varying degrees. Hence, we wish to include as many stocks as
possible in our analysis. Second, 13F information is aggregated at the institution level while our main
hypothesis has testable implications for different fund types. Therefore, our outcome variables should be
constructed at the fund-level which is not possible with 13F holdings information.
Notwithstanding these considerations, we present the results in the Internet Appendix, Table IA.13.
Our treatment variable from FactSet is 79% correlated with the same measure constructed from 13F
information in the overlapping sample of stocks covered by both data sources. This indicates that the
difference in coverage mostly affects the level of institutional ownership, not the cross-sectional distribution.
We then implement the main tests on portfolio rebalancing, returns and liquidity on the overlapping sample
of stocks between the FactSet and 13F databases29 and find that our main results replicate.

29

The overlapping sample includes 3,299 stocks or about 82% of the market cap of the 13F sample of BGI-held
stock as of June 2009. The remaining stocks in the 13F filings is tilted towards small cap stocks. Since tests indicate
that rebalancing is stronger for small-cap stocks, we believe that this robustness test is conservative.

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VIII. Conclusion
We study how changes in expected ownership concentration lead to strategic reactions by funds who
change their investment behavior in affected stocks. We argue that investors are careful to hold stocks with
concentrated ownership as such stocks expose them to the risk of future fragility that arises from
idiosyncratic shocks to the large owners. This precautionary behavior is particularly pronounced for funds
with a larger exposure to financial fragility: open-end funds with correlated flows, concentrated positions,
and illiquid holdings. Such behavior changes the composition of institutional ownership, away from funds
with a high exposure to future fragility and towards funds with a low exposure. These changes have price
and liquidity impact: affected stocks experience negative returns and deteriorating liquidity around the
times when expected stock price fragility increases. At the same time, the aggregate outcome of individual
rebalancing decisions ultimately leads to a decline in realized stock price fragility. Taken together, our
results suggest not only that large asset managers may have a systemic impact on financial market but that
other institutional investors are aware of it and condition their behavior accordingly. This opens up avenues
for future research to understand if and how, for example, individual firms are affected by the industrial
organization of the global asset management industry.

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Appendix A: Variable definitions
We provide definitions for all variables used in this study. Subscripts denote: s for stocks, t for time
period (alternatively semi-annual, monthly, or daily periods), f for funds, d for deals.
Variable

Definition
𝐼𝑂 𝐵𝑅 + 𝐵𝐺𝐼𝑠

(𝐼𝑂 𝐵𝑢𝑦𝑒𝑟 + 𝑇𝑎𝑟𝑔𝑒𝑡𝑑𝑠 )

The combined ownership of stock s of all funds affiliated with BlackRock or BGI, defined
as the sum of shares held by these funds divided by shares outstanding as of June 2009.
The variable is used in continuous form or discretized into quintiles.
For the sample of other asset management mergers, the variable is defined analogously
using the pre-announcement holdings of all funds affiliated with the buyer or target.

𝐷𝐻𝐸𝑅𝐹𝑠

The hypothetical change in the ownership concentration of stock s induced by the merger
between BlackRock and BGI, defined as 𝐷𝐻𝐸𝑅𝐹𝑠 = (𝐼𝑂 𝐵𝑅𝑠 + 𝐼𝑂 𝐵𝐺𝐼𝑠 )2 − 𝐼𝑂 𝐵𝑅𝑠2 −
𝐼𝑂 𝐵𝐺𝐼𝑠2 , where 𝐼𝑂 𝐵𝑅𝑠 / 𝐼𝑂 𝐵𝐺𝐼𝑠 is the fraction of shares outstanding held by
BlackRock- / BGI-affiliated funds as of June 2009. The variable is used in continuous
form or discretized into quintiles.
For the sample of other asset management mergers, the variable is defined analogously
using the pre-announcement holdings of all funds affiliated with the buyer or target.

Δ𝑆ℎ𝑎𝑟𝑒𝑠ℎ𝑒𝑙𝑑𝑠𝑡

The average change in the number of shares held of stock s between periods t-1 and t of
stock s divided by shares outstanding in period t-1. The average is across all residual funds
or alternatively across different sub-group of residual funds where residual funds are all
funds other than funds affiliated with BlackRock or BGI.

%𝑁𝑒𝑡𝐵𝑢𝑦𝑠𝑡

The percentage of funds that increase their holdings in stock s minus the percentage of
funds that reduce their holdings in stock s between periods t-1 and t.

𝑂𝐸𝐹 𝐼𝑂𝑠𝑡

The percentage of shares outstanding of stock s held by open-end funds (OEFs) in period
t.

𝑇𝑜𝑡𝑎𝑙 𝐼𝑂𝑠𝑡

The percentage of shares outstanding of stock s held by all funds and institutions in period
t.

𝑅𝑒𝑠𝑖𝑑𝑢𝑎𝑙 𝐼𝑂𝑠

Same as 𝑇𝑜𝑡𝑎𝑙 𝐼𝑂𝑠𝑡 but excluding the holdings of funds affiliated with BlackRock or BGI
and computed as of June 2009.

𝑃𝑎𝑠𝑠𝑖𝑣𝑒 𝑅𝑒𝑠𝑖𝑑𝑢𝑎𝑙 𝐼𝑂𝑠

Same as 𝑅𝑒𝑠𝑖𝑑𝑢𝑎𝑙 𝐼𝑂𝑠 but only including the holdings of exchange traded funds or
passive index funds (and excluding the holdings of funds affiliated with BGI).

𝑉𝑎𝑛𝑔𝑢𝑎𝑟𝑑 𝐼𝑂𝑠

Same as 𝑃𝑎𝑠𝑠𝑖𝑣𝑒 𝑅𝑒𝑠𝑖𝑑𝑢𝑎𝑙 𝐼𝑂𝑠 but only including the holdings of ETFs managed by
Vanguard.

𝑇𝑜𝑝3𝐸𝑇𝐹 𝐼𝑂𝑠

Same as 𝑃𝑎𝑠𝑠𝑖𝑣𝑒 𝑅𝑒𝑠𝑖𝑑𝑢𝑎𝑙 𝐼𝑂𝑠 but only including the holdings of ETFs managed by
Vanguard, StateStreet, and Societe Generale.

𝐴𝑐𝑡𝑖𝑣𝑒 𝑅𝑒𝑠𝑖𝑑𝑢𝑎𝑙 𝐼𝑂𝑠

𝑅𝑒𝑠𝑖𝑑𝑢𝑎𝑙 𝐼𝑂𝑠 − 𝑃𝑎𝑠𝑠𝑖𝑣𝑒 𝑅𝑒𝑠𝑖𝑑𝑢𝑎𝑙 𝐼𝑂𝑠 .

𝐹𝐶𝑂𝑅𝑅 𝑅𝑒𝑠𝑖𝑑𝑢𝑎𝑙𝑓

The average correlation of flows to fund f with the flows of all other funds that have
positions in the stocks held in the portfolio of fund f. For every stock in the portfolio, we
first compute the simple average of the monthly flow correlation between fund f and every
other fund holding the stock. We then take the weighted-average of these pairwise
correlations across all stocks in the portfolio of fund f, weighted by the market-value of
the position of fund f in stock s. Flow correlations are computed using the trailing 24
months of flows and the variable is computed as of June 2009.

𝐹𝐶𝑂𝑅𝑅 𝐵𝑅/𝐵𝐺𝐼𝑓

The average correlation of flows to fund f with the flows of all funds associated with
BlackRock or BGI. Flow correlations are computed using the trailing 24 months of flows
and the variable is computed as of June 2009.

46

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𝐸𝑋𝑊𝐸𝐼𝐺𝐻𝑇𝑓𝑠

The portfolio weight of fund f in stock s as of June 2009 minus the benchmark portfolio
weight which is inferred as the average portfolio weight in stock s from the holdings of
all physical-replication ETFs in FactSet that track the same benchmark index as fund f.

𝐶𝑂𝑁𝐶𝑓

The Herfindahl-Hirschman Index of portfolio concentration computed from the stocklevel holdings of all stocks in the portfolio of fund f as of June 2009.

𝐼𝐿𝐿𝐼𝑄𝑓

A measure of portfolio illiquidity of fund f which is computed as the inverse of the market
value of equity of each stock s as of June 2009 as in Chen, Goldstein, and Jiang (2010).

𝑊𝑀 − 𝑎𝑑𝑗 𝑟𝑒𝑡𝑢𝑟𝑛𝑠𝑡

Stock return of stock s on trading day t minus the return on the world market portfolio,
computed as the market-value weighted average of the stock returns of all stocks in the
WorldsSope database.

𝐿𝑀 − 𝑎𝑑𝑗 𝑟𝑒𝑡𝑢𝑟𝑛𝑠𝑡

Stock return of stock s on trading day t minus the return on the domestic market portfolio,
computed as the market-value weighted average of the stock returns of all stocks in the
WorldScope database with the same primary listing location (i.e., country) as stock s.

𝐷𝐺𝑇𝑊 − 𝑎𝑑𝑗 𝑟𝑒𝑡𝑢𝑟𝑛𝑠𝑡

Stock return of stock s on trading day t minus the return on the domestic size-valuemomentum matched portfolio, computed as the market-value weighted average of the
stock returns of all stocks in the WorldScope database with the same primary listing
location (i.e., country) as stock s and sorted into terciles on each the market value of
equity, book-to-market, and trailing 12 month stock returns similar to Daniel et al. (1997).

𝑇𝑢𝑟𝑛𝑜𝑣𝑒𝑟𝑠𝑡

The number of shares traded on day t divided by the lag of shares outstanding.

𝐿𝑜𝑔𝑇𝑟𝑎𝑑𝑖𝑛𝑔𝑉𝑜𝑙𝑢𝑚𝑒𝑠𝑡

The number of shares traded (in ‘000) on day t multiplied by the last days closing price.

𝐴𝑚𝑖ℎ𝑢𝑑𝑠𝑡

The daily price impact measure of Amihud (2002) defined as the absolute daily stock
return in percent divided by the dollar trading volume (in thousand USD) of stock s on
trading day t.

𝐹𝑟𝑎𝑔𝑖𝑙𝑖𝑡𝑦 (𝑂𝐸𝐹 𝑜𝑛𝑙𝑦)𝑠𝑡

The fragility measure of Greenwood and Thesmar (2011) of stock s in period t computed
using holdings information from all funds in FactSet that can be linked to the Morningstar
database to obtain monthly fund flows for the previous 36-month period. Holdings and
flows are aggregated to the asset management firm level before computing the measure
as in equation (8) of Greenwood and Thesmar (2011).

𝐹𝑟𝑎𝑔𝑖𝑙𝑖𝑡𝑦 (𝐴𝑙𝑙 𝑓𝑢𝑛𝑑𝑠)𝑠𝑡

Same as 𝐹𝑟𝑎𝑔𝑖𝑙𝑖𝑡𝑦 (𝑂𝐸𝐹)𝑠𝑡 but holdings information from all funds in Factset (including
non open-end funds that cannot be linked to Morningstar) is included. For all funds, semiannual flows are inferred from semi-annual TNA computed from all holdings and
holding-returns using the formula 𝐹𝑙𝑜𝑤𝑓𝑡 = (𝑇𝑁𝐴𝑓𝑡 − 𝑇𝑁𝐴𝑓𝑡−1 ∗ 𝐻𝑜𝑙𝑑𝑖𝑛𝑔𝑅𝑒𝑡𝑢𝑟𝑛𝑓𝑡 )/
𝑇𝑁𝐴𝑓𝑡−1 .

𝐹𝑟𝑎𝑔𝑖𝑙𝑖𝑡𝑦 (𝑑𝑖𝑎𝑔𝑜𝑛𝑎𝑙)𝑠𝑡

The diagonal term of the decomposition of each 𝐹𝑟𝑎𝑔𝑖𝑙𝑖𝑡𝑡𝑦𝑠𝑡 measure as in equation (14)
of Greenwood and Thesmar (2011) that captures the contribution of ownership
concentration and flow volatility.

𝐹𝑟𝑎𝑔𝑖𝑙𝑡𝑖𝑦 (𝑜𝑓𝑓 − 𝑑𝑖𝑎𝑔𝑜𝑛𝑎𝑙)𝑠𝑡

The off-diagonal term of the decomposition of each 𝐹𝑟𝑎𝑔𝑖𝑙𝑖𝑡𝑡𝑦𝑠𝑡 measure as in equation
(14) of Greenwood and Thesmar (2011) that captures the contribution of flow
correlations.

𝑇𝑜𝑡𝑎𝑙𝑉𝑜𝑙𝑠𝑡

Annualized standard deviation of daily total stock returns of stock s in month t.

𝐼𝑑𝑖𝑜𝑠𝑦𝑛𝑟𝑎𝑡𝑖𝑐𝑉𝑜𝑙𝑠𝑡

Annualized standard deviation of the residuals of a regression of all daily total stock
returns of stock s in month t on domestic market, size, value, and momentum factors
constructed from all stock sin the WorldScope database with the same primary listing
location (i.e., country) as stock s.

Δ𝐼𝑂 𝐵𝑙𝑎𝑐𝑘𝑅𝑜𝑐𝑘𝑠𝑡

Change in institutional ownership in stock s by BlackRock funds between periods t-1 and
t.

𝐿𝑜𝑔𝑀𝐶𝐴𝑃𝑠𝑡

Log of the market value of equity (in million USD) of stock s in period t.

47

Electronic copy available at: https://ssrn.com/abstract=2641078

𝑃𝑎𝑠𝑡𝑟𝑒𝑡𝑢𝑟𝑛𝑠𝑡
𝐿𝑜𝑔 𝐵𝑇𝑀𝑠𝑡

Trailing 6-month stock return of stock s in period t.
Log of the book-to-market ratio of firm s in period t defined as the latest book value of
equity (lagged by at least 1 quarter) divided by the one-month lagged market value of
equity.

𝐷𝑖𝑣𝑖𝑑𝑒𝑛𝑑 𝑌𝑖𝑒𝑙𝑑𝑠𝑡
𝑅𝑂𝐸𝑠𝑡

Dividend yield of stock s in period t.
Return on equity of firm s in period t defined as the latest net income divided by book
value of equity.

𝐿𝑒𝑣𝑒𝑟𝑎𝑔𝑒𝑠𝑡

Leverage of firm s in period t defined as the ratio of total liabilities over total assets.

𝐶𝑎𝑠ℎ𝑠𝑡

Cash holdings of firm s in period t defined as the ratio of cash holdings over total assets.

𝑂𝑣𝑒𝑟𝑙𝑎𝑝𝑠

Indicator equal to 1 if stock s is held by both BlackRock and BGI-affiliated as of June
2009.

𝐿𝑜𝑔 𝑃𝑟𝑖𝑐𝑒𝑠𝑡

Log of the unadjusted stock price of stock s in period t.

𝐿𝑜𝑔 𝐹𝑖𝑟𝑚𝑎𝑔𝑒𝑠𝑡
𝑆𝑘𝑒𝑤𝑛𝑒𝑠𝑠𝑠𝑡

Log of the time in years from the first return observation for stock s in Datastream and
period t.
Third moment of daily stock returns of stock s in period t.

𝑊𝑀 − 𝑎𝑑𝑗 𝐻𝑅𝐸𝑇𝑓𝑡

Semi-annual holdings return of fund f between periods t-1 and t where individual stock
returns are adjusted by the return on the world market portfolio, computed as the marketvalue weighted average of the stock returns of all stocks in the WorldScope database.

𝐿𝑀 − 𝑎𝑑𝑗 𝐻𝑅𝐸𝑇𝑓𝑡

Semi-annual holdings return of fund f between periods t-1 and t where individual stock
returns are adjusted by the return on the world market portfolio, computed as the marketvalue weighted average of the stock returns of all stocks in the WorldScope database.

𝐷𝐺𝑇𝑊 − 𝑎𝑑𝑗 𝐻𝑅𝐸𝑇𝑓𝑡

Semi-annual holdings return of fund f between periods t-1 and t where individual stock
returns are adjusted by the return on the domestic size-value-momentum matched
portfolio, computed as the market-value weighted average of the stock returns of all
stocks in the WorldScope database with the same primary listing location (i.e., country)
as stock s and sorted into terciles on each the market value of equity, book-to-market, and
trailing 12 month stock returns similar to Daniel et al. (1997).

𝐸𝑊 𝐼𝑂 𝐵𝑅 + 𝐵𝐺𝐼𝑓

Equally-weighted average of 𝐼𝑂 𝐵𝑅 + 𝐵𝐺𝐼𝑠 across all stocks in the portfolio of fund f as
of June 2009.

𝑉𝑊 𝐼𝑂 𝐵𝑅 + 𝐵𝐺𝐼𝑓

Position-weighted average of 𝐼𝑂 𝐵𝑅 + 𝐵𝐺𝐼𝑠 across all stocks in the portfolio of fund f as
of June 2009.

48

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Figure 1: Merger timeline
This figure gives an overview of the timeline of the merger between BlackRock and BGI, the main event dates that we consider in
the empirical analysis, and the classification of the different semi-annual periods in the overall sample period. Periods labelled
“PRE” refer to semi-annual periods prior to the merger announcement in June 2009. Periods labelled “POST” refer to semi-annual
periods after the merger announcement in June 2009.
BGI For Sale
3/16/2009

June
2008

2

1

CVC

Merger
Expiration Antitrust
Deal
Announcement Go Shop Approval Completion
4/9/2009
6/11/2009
6/18/2009 9/23/2009 12/1/2009

December
2008

PRE 2

June
2009

PRE 1

December
2009

POST 1

PRE

June
2010

POST 2

POST

49

Electronic copy available at: https://ssrn.com/abstract=2641078

Figure 2: Portfolio rebalancing by residual funds
This figure displays estimates of the tests on portfolio rebalancing by residual funds. Specifically, it displays the time series of
coefficient estimates of the interaction term between the treatment variable and every semi-annual period individually (black line)
including their 95% confidence interval (grey lines) for difference in difference regressions as reported in Table 3 but for an
extended sample window from 2004 to 2014. Panel A presents these estimates for the sample of open-end funds (as in Table 3,
Panel A, Column 3), Panel B for non-open-end funds (as in Table 3, Panel A, Column 4). All other specifications are unchanged.
The vertical line separates the pre-event periods from the periods after the BlackRock-BGI merger announcement.

Panel A: Open-end funds only
0.03
0.02
0.01
0
2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2012

2013

2014

-0.01
-0.02
-0.03
-0.04
-0.05
Estimates

95% Confidence Bounds

Panel B: Non-open-end funds only
0.05
0.04
0.03
0.02
0.01
0
2004

2005

2006

2007

2008

2009

2010

2011

-0.01
-0.02
-0.03
Estimates

95% Confidence Bounds

50

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Table 1: Descriptive statistics
This table presents descriptive statistics on the sample. Panel A reports the number of distinct funds managed by BlackRock and
Barclays Global Investors (BGI) as of June 2009 covered in our sample. The panel reports the total number of funds, the total
number of exchange-traded funds (ETFs), the total number of non-ETFs, the total assets under management (AUM) of these funds,
and the estimated percentage of AUM relative to the AUM reported in the annual reports of BlackRock and Barclays. Panel B
reports the number of stocks and the percentage of world market capitalization these stocks represent as of June 2009. In Column
1, the universe of stocks includes all stocks in the WorldScope database for comparison. In Column 2 / 3 / 4, the universe includes
all distinct stocks held by at least one BGI fund / at least one BlackRock fund / at least one BGI and one BlackRock fund. Panel C
reports stock characteristics for all stocks in the WorldScope database and separately for every quintile of combined BlackRock
and BGI ownership as of June 2009. The stock characteristics include: Residual IO as the percentages of shares outstanding held
by all other investment funds in FactSet excluding BlackRock and BGI funds, MCAP as the market value of equity in million USD,
Pastreturn as the trailing 6-month total stock return, BTM as the book-to-market ratio, Dividend Yield as the percentage dividend
yield, ROE as the return on equity, Leverage as the total leverage of the firm, and Cash as the ratio of total cash holdings divided
by total assets.

Panel A: Coverage of BlackRock and BGI funds as of June 2009
BlackRock funds

BGI funds

308
30
278

333
302
31

159.8
79%

306.3
31%
90%

Number of Funds in sample
Out of which ETFs
Out of which non-ETFs
Total Assets under Management (AUM, $ billion)
Relative to 2008 Equity AUM 1)
ETF AUM relative to 6/2009 iShares equity AUM 2)

1) These figures are calculated as follows: 2008 equity AUM for BlackRock, according to the BlackRock 2009 Annual Report amounted to $203.3 billion. We cover
$159.8 billion equity AUM via FactSet, or approximately 159.8/203.3=78.6%. We estimate 2008 equity AUM for BGI by applying the asset mix that BGI contributed
to BlackRock in the 2009 Annual Report to the total AUM of BGI that is reported in the Barclays 2008 Annual Report and which amounted to $1.495 trillion as of
December 2008 (p. 13 of the Barclays 2008 Annual Report, no break-up by asset class reported). The BlackRock 2008 Annual Report states that the BGI transaction
added $1.188 trillion in equity assets (p. 14), $517 billion in fixed income assets (p. 16), $49 billion in alternative assets (p. 18), and $59 billion in cash assets (p. 20)
amounting to $1.813 trillion in total out of which 65.5% are equity. Applying the same product mix to the 2008 AUM of BGI, we obtain an estimate of 2008 BGI equity
AUM of 65.5% * $1.495 trillion = $979 billion of which we cover $306.3/$979=31.2%.
2) This figure is calculated as follows. The BlackRock 2009 Annual report states, on page 13, $495.5 billion AUM for iShares products, 77% ($495.5*0.77=$381.5
billion) of which in equity offerings. Total iShares AUM grew by $169.6 between December 2008 and December 2009. Assuming linear growth in the same proportions
for the different asset classes gives a June 2009 estimate for equity AUM in iShares products of $381.5 – 0.5*$169.6 = $296.7 billion out of which we capture $266.8
billion with the FactSet data, or 89.6%.

Panel B: Stock ownership by BlackRock and BGI funds as of June 2009

Number of distinct stocks
% of WorldScope Market Cap.

WorldScope

BGI funds

BlackRock funds

36,660
100%

7,348
69%

6,476
65%

51

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BlackRock & BGI
funds
5,497
63%

Panel C: Stock characteristics by combined BlackRock + BGI ownership (IO BR+BGI) as of June 2009

Worldscope

Mean
Median
STD

Residual
IO
0.107
0.054
0.127

MCAP

BTM
1.100
0.888
0.855

Past
Return
0.313
0.189
0.657

1,798
206
8,777

ROE

Leverage

Cash

0.017
0.063
0.341

Div.
Yield
0.023
0.013
0.030

0.501
0.501
0.240

0.181
0.126
0.178

Full sample
(Mean IO BR+BGI
= 1.5%)

Mean
Median
STD

0.209
0.173
0.155

3,922
780
13,196

0.939
0.792
0.686

0.263
0.146
0.776

0.039
0.072
0.310

0.023
0.015
0.028

0.527
0.529
0.239

0.185
0.126
0.184

IO BR+BGI Q = 1
(Mean = 0.03%)

Mean
Median
STD

0.081
0.057
0.077

868
472
1,908

1.089
0.963
0.709

0.307
0.208
0.483

0.046
0.064
0.284

0.028
0.021
0.029

0.500
0.494
0.237

0.179
0.135
0.161

IO BR+BGI Q = 2
(Mean = 0.2%)

Mean
Median
STD

0.128
0.102
0.098

2,034
683
4,820

1.104
0.955
0.789

0.272
0.186
0.484

0.014
0.057
0.320

0.024
0.017
0.028

0.533
0.536
0.239

0.173
0.119
0.176

IO BR+BGI Q = 3
(Mean = 0.9%)

Mean
Median
STD

0.204
0.178
0.121

7,543
2,726
17,003

0.818
0.694
0.609

0.322
0.169
1.364

0.074
0.086
0.285

0.026
0.020
0.028

0.571
0.579
0.225

0.165
0.119
0.163

IO BR+BGI Q = 4
(Mean = 2.0%)

Mean
Median
STD

0.258
0.248
0.132

6,372
687
19,332

0.832
0.681
0.636

0.266
0.117
0.687

0.031
0.078
0.359

0.019
0.006
0.026

0.531
0.529
0.253

0.208
0.140
0.206

IO BR+BGI Q = 5
(Mean = 4.2%)

Mean
Median
STD

0.375
0.373
0.144

2,941
796
12,521

0.844
0.712
0.599

0.148
0.061
0.469

0.032
0.075
0.294

0.017
0.000
0.026

0.503
0.507
0.235

0.202
0.130
0.208

52

Electronic copy available at: https://ssrn.com/abstract=2641078

Table 2: Portfolio rebalancing by residual funds
This table relates portfolio rebalancing by residual funds to combined BlackRock and BGI ownership in the cross-section of stocks. The sample includes the 7,348 stocks held by at
least one BGI fund as of June 2009 (i.e., prior to the merger) for the semi-annual periods from December 2008 to June 2010 (i.e., four semi-annual periods, symmetric around the
merger event). The estimated regression equation is:
Δ𝑆ℎ𝑎𝑟𝑒𝑠𝐻𝑒𝑙𝑑𝑠𝑡+1 = 𝛽1 𝑇𝑠 + 𝛽2 𝑃𝑜𝑠𝑡𝑡 + 𝛽3 𝑇𝑠 × 𝑃𝑜𝑠𝑡𝑡 + 𝛾1 ′ (𝑃𝑜𝑠𝑡𝑡 × 𝑋𝑠𝑡 ) + 𝛾2′ 𝑋𝑠𝑡 + 𝛼𝑡 + 𝛼𝑠 + 𝜖𝑠𝑡+1 ,
where 𝛥𝑆ℎ𝑎𝑟𝑒𝑠𝐻𝑒𝑙𝑑𝑠𝑡 measures the average portfolio rebalancing of stock s in semi-annual period t across all residual funds in FactSet (i.e., all funds excluding BlackRock and
BGI funds) and computed as the average number of shares traded over the period divided by the number of shares outstanding at the beginning of the period. %𝑁𝑒𝑡𝐵𝑢𝑦𝑠𝑡 is an
alternative measure of rebalancing and computed as the percentage of residual funds that increase their holdings in stock s in period t minus the percentage of residual funds that
decrease their holdings in the same stock over the same period. The treatment variable 𝑇𝑠 is defined as 𝐼𝑂 𝐵𝑅 + 𝐵𝐺𝐼𝑠 , the combined ownership of stock s by BlackRock and BGI
funds divided by shares outstanding and measured as of June 2009 in Columns 1 to 4, 6, and 7 and the table includes specifications where the treatment variable is used in raw form
or transformed into quintiles. In Columns 5 and 8, the treatment variable 𝑇𝑠 is defined as 𝐷𝐻𝐸𝑅𝐹𝑠 = (𝐼𝑂 𝐵𝑅𝑠 + 𝐼𝑂 𝐵𝐺𝐼𝑠 )2 − 𝐼𝑂 𝐵𝑅𝑠2 − 𝐼𝑂 𝐵𝐺𝐼𝑠2 , the hypothetical increase in the
Herfindahl-Hirschman index of firm-level ownership concentration that would result from the merger between BlackRock and BGI, everything else equal. 𝑃𝑜𝑠𝑡𝑡 is an indicator
equal to 1 for the semi-annual periods December 2009 and June 2010 and 0 otherwise and the main coefficient of interest is 𝛽1 on the interaction term between 𝑃𝑜𝑠𝑡𝑡 and 𝑇𝑠 . The
regression further includes period fixed effects denoted by 𝛼𝑡 , stock fixed effects denoted by 𝛼𝑠 , stock characteristics denoted by the vector 𝑋𝑠𝑡 and additional interaction terms
between the stock characteristics and the 𝑃𝑜𝑠𝑡𝑡 indicator. The vector 𝑋𝑠𝑡 includes the following stock characteristics: Δ 𝐼𝑂 𝐵𝑙𝑎𝑐𝑘𝑅𝑜𝑐𝑘𝑠𝑡 as the change in ownership by BlackRock
funds over the period, 𝐿𝑜𝑔 𝑀𝐶𝐴𝑃𝑠𝑡 as the log of the market value of equity in million USD, 𝑃𝑎𝑠𝑡𝑟𝑒𝑡𝑢𝑟𝑛𝑠𝑡 as the trailing 6-month total stock return, 𝐿𝑜𝑔 𝐵𝑇𝑀𝑠𝑡 as log of the bookto-market ratio, 𝐷𝑖𝑣𝑖𝑑𝑒𝑛𝑑 𝑌𝑖𝑒𝑙𝑑𝑠𝑡 as the percentage dividend yield, 𝑅𝑂𝐸𝑠𝑡 as the return on equity, 𝐿𝑒𝑣𝑒𝑟𝑎𝑔𝑒𝑠𝑡 as the total leverage of the firm, and 𝐶𝑎𝑠ℎ𝑠𝑡 as the ratio of total cash
holdings divided by total assets. In Columns 3 to 8, the variable 𝑃𝑜𝑠𝑡𝑡 is decomposed into period-specific indicator variables: 𝑃𝑟𝑒1𝑡 is equal to 1 for the period ending in June 2009
and 0 otherwise, 𝑃𝑜𝑠𝑡1 is equal to 1 for the period ending in December 2009 and 0 otherwise, and 𝑃𝑜𝑠𝑡2𝑡 is equal to 1 for the period ending in June 2010 and 0 otherwise. * / ** /
*** indicate statistical significance at the 10% / 5% / 1% level respectively, computed from standard errors that allow for clustering at the stock level.

53

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Treatment variable

IO BR+BGI
(1)
-1.1596***
(-5.82)

Pre 1 × Treatment

Post 2 × Treatment
Pre 1 × Treatment Quintiles
Post 1 × Treatment Quintiles
Post 2 × Treatment Quintiles

Pastreturn
Log BTM
Dividend Yield
ROE
Leverage
Cash
Unreported
Fixed effects
Observations
Adjusted R2

% NetBuy

(3)

(4)

(5)

0.3258
(1.20)
-1.3952***
(-5.09)
-0.6522**
(-2.30)

Post 1 × Treatment

Log MCAP

(2)

DHERF

(6)

(7)

(8)

-0.0168***
(-5.91)

Post × Treatment Quintiles

Δ IO BlackRock

IO BR+BGI

ΔSharesHeld

Dependent variable
Post × Treatment

DHERF

0.8501*
(1.86)
-0.0372
(-1.62)
0.1288***
(6.64)
0.0579**
(2.46)
-0.0019
(-1.00)
0.0005**
(2.21)
0.0934
(1.23)
0.0281
(0.50)

22,732
0.11

-0.1110
(-0.48)
-3.4386***
(-13.72)
-1.9014***
(-7.68)

0.0054
(1.39)
-0.0174***
(-4.52)
-0.0111***
(-2.74)
0.9865**
0.6803
0.8014
(2.17)
(0.96)
(1.16)
-0.0374
-0.0261
-0.0260
(-1.63)
(-1.04)
(-1.04)
0.1298***
0.1431***
0.1437***
(6.71)
(5.08)
(5.11)
0.0590**
0.0686***
0.0692***
(2.51)
(2.58)
(2.60)
-0.0017
-0.0054*
-0.0051*
(-0.85)
(-1.93)
(-1.84)
0.0005**
0.0006**
0.0006**
(2.28)
(1.98)
(2.02)
0.0902
0.1056
0.1023
(1.19)
(1.35)
(1.31)
0.0325
-0.0033
0.0003
(0.58)
(-0.05)
(0.01)
Controls × period indicators
Stock & period
22,732
22,732
22,732
0.11
0.12
0.12

0.0008
(0.22)
-0.0198***
(-5.10)
-0.0122***
(-3.06)
0.6922
(1.01)
-0.0267
(-1.07)
0.1439***
(5.12)
0.0700***
(2.63)
-0.0049*
(-1.74)
0.0006**
(2.05)
0.1007
(1.28)
-0.0004
(-0.01)

22,732
0.12

54

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0.0010
-0.0025
(0.34)
(-0.83)
-0.0451***
-0.0465***
(-13.68)
(-14.31)
-0.0289***
-0.0289***
(-8.86)
(-8.89)
0.5988
1.0214
0.8632
(0.87)
(1.54)
(1.32)
-0.0623***
-0.0625***
-0.0641***
(-3.49)
(-3.56)
(-3.61)
0.1712***
0.1731***
0.1730***
(6.88)
(7.01)
(7.01)
0.0416**
0.0442**
0.0448**
(2.19)
(2.35)
(2.37)
-0.0052**
-0.0045**
-0.0042*
(-2.24)
(-1.97)
(-1.82)
0.0004**
0.0004**
0.0005**
(2.31)
(2.51)
(2.55)
0.0115
0.0048
-0.0005
(0.19)
(0.08)
(-0.01)
0.0657
0.0744
0.0702
(1.27)
(1.45)
(1.37)
Controls × period indicators
Stock & period
22,732
22,732
22,732
0.22
0.23
0.23

Table 3: Portfolio rebalancing by fund type
This table examines portfolio rebalancing across fund types. The sample and specifications are as in Table 2 but in Panel A, the dependent variable Δ𝑆ℎ𝑎𝑟𝑒𝑠𝐻𝑒𝑙𝑑𝑠𝑡+1 is now
aggregated separately for the subsample of residual funds with an open-end fund structure (OEFs) and for all other residual funds (Non-OEFs). The table repeats the specification of
Table 2, Column 3 for both treatment variables 𝐼𝑂 𝐵𝑅 + 𝐵𝐺𝐼𝑠 and 𝐷𝐻𝐸𝑅𝐹𝑠 and all other specifications are unchanged. The sample includes all stocks held by at least one BGI fund
as of June 2009. Panel B estimates the same specifications but uses as dependent variable 𝑂𝐸𝐹 𝐼𝑂𝑠𝑡+1 , defined as the sum of shares of stock s held by open-end funds in FactSet
divided by shares outstanding at the end of the period in Columns 1 to 3, or 𝑇𝑜𝑡𝑎𝑙 𝐼𝑂𝑠𝑡+1 , defined as the sum of shares of stock s held by all funds in FactSet divided by shares
outstanding at the end of the period in Columns 4 to 6. * / ** / *** indicate statistical significance at the 10% / 5% / 1% level respectively, computed from standard errors that allow
for clustering at the stock level.

Panel A: Sample splits by OEF and Non-OEF funds
Sample

OEF

Treatment variable

Post 1 × Treatment
Post 2 × Treatment

Non-OEF

OEF

Non-OEF
DHERF

ΔSharesHeld
(1)
0.5863*
(1.85)
-1.5834***
(-4.64)
-0.8722**
(-2.28)

Pre 1 × Treatment Quintiles
Post 1 × Treatment Quintiles
Post 2 × Treatment Quintiles
Unreported
Fixed effects
Observations
Adjusted R2

OEF

IO BR+BGI

Dependent variable
Pre 1 × Treatment

Non-OEF

22,655
0.23

(2)
1.1323***
(3.40)
0.6406*
(1.84)
2.0440***
(5.52)

ΔSharesHeld
(3)

0.0051
(1.22)
-0.0187***
(-4.10)
-0.0124**
(-2.45)
Controls, controls × period indicators
Stock & period
22,601
22,655
0.13
0.23

(4)

(5)
10.6962
(0.83)
-49.7991***
(-3.19)
-29.0383*
(-1.88)

(6)
5.7626
(0.52)
-0.1620
(-0.01)
32.0926**
(2.48)

0.0194***
(3.86)
0.0134***
(2.59)
0.0315***
(5.86)

22,601
0.14

55

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Controls, controls × period indicators
Stock & period
22,655
22,601
0.23
0.13

Panel B: Changes in the composition of residual ownership
Treatment variable

IO BR+BGI

Dependent variable
Pre 1 × Treatment
Post 1 × Treatment
Post 2 × Treatment
Pre 1 × Treatment Quintiles
Post 1 × Treatment Quintiles
Post 2 × Treatment Quintiles
Unreported
Fixed effects
Observations
Adjusted R2

DHERF

IO BR+BGI

OEF IO
(1)
-0.0563
(-1.48)
-0.1892***
(-4.01)
-0.1242**
(-2.13)

DHERF
Total IO

(2)

(3)
-3.1787
(-1.51)
-6.6074**
(-2.47)
-5.4045*
(-1.85)

-0.0003
(-0.67)
-0.0017***
(-3.41)
-0.0008
(-1.27)
Controls, controls × period indicators
Stock & period
21,209
21,209
21,209
0.94
0.94
0.94

(4)
-0.0317
(-0.69)
-0.0709
(-1.23)
-0.0185
(-0.26)

(5)

(6)
-3.2202
(-1.34)
-4.2357
(-1.51)
-3.6324
(-1.13)

0.0004
(0.87)
0.0001
(0.15)
0.0010
(1.28)
Controls, controls × period indicators
Stock & period
21,209
21,209
21,209
0.95
0.95
0.95

56

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Table 4: Portfolio rebalancing by OEFs and fund characteristics
This table relates portfolio rebalancing of open-end funds (OEFs) to fund characteristics. The data is as in Table 2 but now expanded
to the fund-stock-period level and only covering portfolio rebalancing by residual OEFs. We estimate:
Δ𝑆ℎ𝑎𝑟𝑒𝑠𝐻𝑒𝑙𝑑𝑓𝑠𝑡+1 = 𝛽1 𝛼𝑡 × 𝑇𝑠 × 𝐶𝑓𝑠 + 𝛽2 𝛼𝑡 × 𝑇𝑠 + 𝛽3 𝛼𝑡 × 𝐶𝑓𝑠 + 𝛽4 𝑇𝑠 × 𝐶𝑓𝑠 + 𝛾1′ (𝛼𝑡 × 𝑋𝑠𝑡 × 𝐶𝑓𝑠 ) + 𝛾2′ 𝑋𝑠𝑡 + 𝛾3′ 𝐶𝑓𝑠 + 𝛼𝑡 +
𝛼𝑠 + 𝛼𝑓 + 𝜖𝑓𝑠𝑡+1 .
The vector 𝐶𝑓𝑠 includes characteristics of fund f (some of which specific to stock s) that are all measured as of June 2009. The main
coefficients of interest include the triple interaction terms between these fund characteristics, the period indicators 𝛼𝑡 and the
treatment variable 𝑇𝑠 defined as 𝐼𝑂 𝐵𝑅 + 𝐵𝐺𝐼𝑠 in Columns 1 to 4 and as 𝐷𝐻𝐸𝑅𝐹𝑠 in Column 5. The regression includes all double
interactions and individual terms of these variables, fund, period, and stock fixed effects as well as stock characteristics in the
vector 𝑋𝑠𝑡 (including their corresponding double and triple interaction terms with the same fund characteristics, all of which are
included in the vector 𝛼𝑡 × 𝑋𝑠𝑡 × 𝐶𝑓𝑠 ). The vector 𝐶𝑓𝑠 includes the following characteristics that have been transformed to
indicators that equal 1 for funds with above-median values and 0 otherwise: 𝐹𝐶𝑂𝑅𝑅 𝐵𝑅/𝐵𝐺𝐼𝑓 is the average correlation of flows
to fund f and all BlackRock and BGI funds, 𝐹𝐶𝑂𝑅𝑅 𝑅𝑒𝑠𝑖𝑑𝑢𝑎𝑙𝑓 is the position-weighted average correlation of flows to fund f and
all other funds (excluding BlackRock and BGI funds) that also hold the stocks in the portfolio of fund f, 𝐸𝑋𝑊𝐸𝐼𝐺𝐻𝑇𝑓𝑠 is the weight
of fund f in stock s in excess of the benchmark, 𝐶𝑂𝑁𝐶𝑓 is the portfolio concentration of fund f measured as a Herfindahl-Hirschman
index over all stock holdings, and 𝐼𝐿𝐿𝐼𝑄𝑓 is the average portfolio illiquidity measured via the inverse of the average market
capitalization across all stocks in the portfolio of fund f as in Chen, Goldstein, and Jiang (2010). * / ** / *** indicate statistical
significance at the 10% / 5% / 1% level, computed from standard errors that allow for clustering at the stock level.
Sample

OEF only

Treatment variable

IO BR+BGI

Pre 1 × Treatment Q. × FCORR Residual
Post 1 × Treatment Q.× FCORR Residual
Post 2 × Treatment Q. × FCORR Residual
Pre 1 × Treatment Q. × FCORR BR / BGI
Post 1 × Treatment Q. × FCORR BR / BGI
Post 2 × Treatment Q.× FCORR BR / BGI

(1)
-0.0051
(-1.10)
-0.0285***
(-5.94)
-0.0117**
(-2.55)
0.0052
(1.21)
-0.0095**
(-2.15)
-0.0109**
(-2.46)

Pre 1 × Treatment Q. × EXWEIGHT
Post 1 × Treatment Q.× EXWEIGHT
Post 2 × Treatment Q. × EXWEIGHT
Pre 1 × Treatment Q.× CONC
Post 1 × Treatment Q. × CONC
Post 2 × Treatment Q.× CONC
Pre 1 × Treatment Q. × ILLIQ
Post 1 × Treatment Q. × ILLIQ
Post 2 × Treatment Q. × ILLIQ
Unreported
Fixed effects
Observations
Adjusted R2

DHERF

ΔSharesHeld

Dependent variable

2,291,487
0.04

(2)

(3)

(4)
-0.0047
(-1.02)
-0.0280***
(-5.79)
-0.0148***
(-3.13)
0.0040
(0.92)
-0.0121***
(-2.73)
-0.0157***
(-3.35)
-0.0060
0.0002
(-1.54)
(0.04)
-0.0212***
-0.0337***
(-5.45)
(-6.78)
-0.0048
-0.0218***
(-1.21)
(-4.34)
0.0110***
0.0136***
(2.95)
(2.67)
-0.0122***
-0.0188***
(-3.13)
(-3.55)
-0.0199***
-0.0259***
(-4.96)
(-4.74)
-0.0043
0.0009
(-1.37)
(0.19)
-0.0070**
-0.0133***
(-2.17)
(-2.77)
0.0007
-0.0083*
(0.21)
(-1.67)
Controls, simple and triple interaction terms
Fund, Stock, Period
3,101,371
4,155,218
2,029,093
0.07
0.05
0.07

57

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(5)
-0.0122***
(-2.77)
-0.0276***
(-6.12)
-0.0169***
(-3.79)
0.0039
(0.95)
-0.0109***
(-2.65)
-0.0131***
(-2.99)
0.0004
(0.10)
-0.0338***
(-7.10)
-0.0248***
(-5.23)
0.0157***
(3.29)
-0.0191***
(-3.85)
-0.0243***
(-4.78)
0.0027
(0.62)
-0.0146***
(-3.22)
-0.0078*
(-1.68)

2,029,093
0.07

Table 5: Portfolio rebalancing by OEFs, controlling for passive residual ownership
This table presents tests to examine if portfolio rebalancing of open-end funds (OEFs) is related to institutional ownership of passive investment funds other than those managed by
BGI. The estimated regression is as in Table 3, Panel A with the addition of additional control variable that measure passive residual ownership of stock s. We include different
measures of institutional ownership by passive funds (other than BGI funds): 𝑃𝑎𝑠𝑠𝑖𝑣𝑒 𝑅𝑒𝑠𝑖𝑑𝑢𝑎𝑙 𝐼𝑂𝑠 is the institutional ownership of stock s of all passive ETF and index funds in
FactSet other than passive funds managed by BGI, 𝑉𝑎𝑛𝑔𝑢𝑎𝑟𝑑 𝐼𝑂𝑠 is the institutional ownership of stock s of all Vanguard funds in FactSet, and 𝑇𝑜𝑝 3 𝐸𝑇𝐹 𝐼𝑂𝑠 is the institutional
ownership of stock s of the top 3 ETF providers other than BGI (i.e., Vanguard, StateStreet, Societe Generale). All these variables are measured in June 2009 and are expressed in
quintiles. All other specifications are as in Table 3, Panel A and * / ** / *** indicate statistical significance at the 10% / 5% / 1% level, computed from standard errors that allow for
clustering at the stock level.
Sample

OEF only

Treatment variable

IO BR+BGI

DHERF
ΔSharesHeld

Dependent variable
Pre 1 × Treatment
Post 1 × Treatment
Post 2 × Treatment

(1)
0.3328
(0.93)
-1.0532***
(-2.69)
-1.1490**
(-2.51)

Pre 1 × Treatment Quintiles
Post 1 × Treatment Quintiles
Post 2 × Treatment Quintiles
Pre 1 × Passive Res. IO
Post 1 × Passive Res. IO
Post 2 × Passive Res. IO
Pre 1 × Passive Res. IO Q.
Post 1 × Passive Res. IO Q.
Post 2 × Passive Res. IO Q.
Pre 1 × Vanguard IO Q.
Post 1 × Vanguard IO Q.
Post 2 × Vanguard IO Q.

(2)

(3)

(4)

-0.0010
(-0.22)
-0.0176***
(-3.47)
-0.0279***
(-4.75)

-0.0121*
(-1.84)
-0.0257***
(-3.72)
-0.0448***
(-5.80)

-0.0084
(-1.35)
-0.0257***
(-3.94)
-0.0431***
(-5.96)

(5)
1.5249
(0.12)
-28.4040*
(-1.87)
-29.5292*
(-1.84)

(6)

-0.0054
(-1.21)
-0.0181***
(-3.71)
-0.0223***
(-4.16)
0.2256*
(1.92)
-0.4823***
(-3.73)
0.0094
(0.06)

0.1608
(1.26)
-0.3350**
(-2.34)
0.1728
(1.03)
0.0101*
(1.89)
-0.0019
(-0.34)
0.0255***
(3.96)

0.0127**
(2.47)
-0.0013
(-0.25)
0.0226***
(3.75)
0.0235***
(3.27)
0.0098
(1.35)
0.0445***

58

Electronic copy available at: https://ssrn.com/abstract=2641078

(5.16)
0.0182***
(2.62)
0.0096
(1.36)
0.0412***
(5.07)
Controls, controls × period indicators
Stock & Period
22,655
22,655
0.23
0.23

Pre 1 × Top 3 ETF IO Q.
Post 1 × Top 3 ETF IO Q.
Post 2 × Top 3 ETF IO Q.
Unreported
Fixed effects
Observations
Adjusted R2

22,655
0.23

22,655
0.23

59

Electronic copy available at: https://ssrn.com/abstract=2641078

22,655
0.23

22,655
0.23

Table 6: Stock market effects around key merger event dates
This table examines stock market effects around key merger event dates at the daily frequency. Panels A to C examine abnormal stock returns, Panels D and E examine stock liquidity.
Panels A and B present average daily abnormal stock returns per quintile of the treatment variables 𝐼𝑂 𝐵𝑅 + 𝐵𝐺𝐼𝑠 and 𝐷𝐻𝐸𝑅𝐹𝑠 around the merger announcement on June 11, 2009
and the antitrust approval on September 23, 2009 over a 2-day event window including the announcement day ( = day 0) and the following trading day (= day 1). 3 different versions
of daily abnormal stock returns are computed: World Market (WM)-adjusted returns are computed as daily stock returns minus the return on the world market portfolio, Local Market
(LM)-adjusted returns are computed as daily stock returns minus the return on the domestic market portfolio, and DGTW-adjusted returns are computed as daily stock returns minus
the return on a domestic size-value-momentum sorted portfolio. Panel C presents panel regressions over a symmetric 20 trading day sample window of the following form:
𝐴𝑅𝑠𝑡 = 𝛽1 𝐸𝑡 × 𝑇𝑠 + 𝛽2 𝐸𝑡 × 𝑃𝑎𝑠𝑠𝑖𝑣𝑒 𝑅𝑒𝑠𝑖𝑑𝑢𝑎𝑙 𝐼𝑂𝑠 + 𝛾1′ (𝐸𝑡 × 𝑋𝑠 ) + 𝛼𝑡 + 𝛼𝑠 + 𝑇𝑂𝑀𝑐𝑡 + 𝑇𝑂𝑊𝑐𝑡 + 𝜖𝑠𝑡.
The vector 𝐸𝑡 includes indicator variables for different time windows in the sample: [-5,1] is an indicator equal to 1 for the 5 trading days prior to the respective event date and 0
otherwise, [0,1] is an indicator equal to 1 for the 2 trading days in the event window and 0 otherwise, [2,6] is an indicator equal to 1 for the 5 trading days following the event window
and 0 otherwise. Finally, [7,20] is an indicator equal to 1 for all remaining trading days after day 6 and 0 otherwise. All regressions control for institutional ownership by passive
funds other than those of BGI and stock characteristics (including the interaction terms of these variables with the event indicator variables and country-specific indicators for each
Monday to control for turn-of-the-week effects and the first 3 trading days of each month to control for turn-of-the-month effects, denoted 𝑇𝑂𝑊𝑐𝑡 and 𝑇𝑂𝑀𝑐𝑡 respectively), stock
and trading day fixed effects. The same tests for the merger announcement are presented in the Internet Appendix. Panels D to E examine daily stock liquidity after key merger event
dates relative to daily stock liquidity before the announcement that BGI was for sale. The measure of daily stock liquidity is 𝐴𝑚𝑖ℎ𝑢𝑑𝑠𝑡 in Panel D, defined as the absolute daily stock
return divided by the dollar trading volume on that day, and 𝐿𝑜𝑔𝑇𝑟𝑎𝑑𝑖𝑛𝑔𝑉𝑜𝑙𝑢𝑚𝑒𝑠𝑡 in Panel E, defined as the natural logarithm of number of shares traded multiplied by the lagged
stock price. Additional tests using 𝐿𝑜𝑔 𝑇𝑢𝑟𝑛𝑜𝑣𝑒𝑟𝑠𝑡 defined as the natural logarithm of daily shares traded divided by shares outstanding are presented in the Internet Appendix. All
panels present panel regressions over a symmetric 60 trading day sample window that includes the 60 trading days prior to announcement that BGI is for sale and the 60 trading days
following the respective event date indicated at the top of each column. Each column presents estimates of the following regression equation:
𝐿𝑖𝑞𝑢𝑖𝑑𝑖𝑡𝑦𝑠𝑡 = 𝛽1 𝐸𝑡 × 𝑇𝑠 + 𝛽2 𝐸𝑡 × 𝑃𝑎𝑠𝑠𝑖𝑣𝑒 𝑅𝑒𝑠𝑖𝑑𝑢𝑎𝑙 𝐼𝑂𝑠 + 𝛾1′ (𝐸𝑡 × 𝑋𝑠 ) + 𝛼𝑡 + 𝛼𝑠 + 𝑇𝑂𝑀𝑐𝑡 + 𝑇𝑂𝑊𝑐𝑡 + 𝜖𝑠𝑡 .
The variable 𝐸𝑡 is now defined as an indicator equal to 1 for trading days 2 to 60 following the event window and 0 for the 60 trading days prior to the announcement that BGI is for
sale. Days that fall in an event window (of the event itself or a neighboring alternative event in case it overlaps with the symmetric 60 trading day sample) are excluded from the
regression. The following event dates are included, each in a separate regression: the announcement that BGI is for sale on March 16, 2009, the merger announcement on June 11,
2009, the antitrust approval on September 23, 2009, and the deal completion announcement on December 1, 2009. Both panels present specifications with the treatment variable
𝐼𝑂 𝐵𝑅 + 𝐵𝐺𝐼𝑠 and the sample includes all stocks held by at least one BGI fund as of June 2009 as well as specifications with the alternative treatment variable 𝐷𝐻𝐸𝑅𝐹𝑠 . All
regressions include country-level liquidity as an additional control variable, all other specifications are unchanged. * / ** / *** indicate statistical significance at the 10% / 5% / 1%
level, computed from standard errors that are double-clustered at the stock and trading day level in all panels.

Panel A: Abnormal stock returns, univariate quintile sorts (by IO BR+BGI)
Sample

World Market (WM)-adj.
Local Market (LM)-adj.
DGTW-adj.

Merger Announcement [0,1]

Antitrust Approval [0,1]

1 (Low)

2

3

4

5 (High)

0.416***
(4.65)
0.247*
(1.84)
0.162
(1.02)

0.327***
(3.61)
0.162***
(3.37)
0.011
(0.19)

0.277**
(2.54)
0.127
(1.53)
0.066
(0.68)

0.328***
(3.19)
0.212**
(2.50)
0.078
(1.43)

0.087**
(2.18)
-0.029
(-1.51)
-0.127***
(-6.47)

High Low
-0.329***
(-3.45)
-0.275**
(-2.02)
-0.289*
(-1.79)

1 (Low)

2

3

4

5 (High)

0.710
(1.31)
0.112
(0.90)
0.08971
(0.95)

0.227
(0.64)
0.06374
(1.65)
0.140
(1.54)

-0.006
(-0.02)
-0.05772
(-1.09)
0.021
(0.74)

-0.520***
(-5.53)
-0.280***
(-3.72)
-0.163***
(-3.86)

-0.660***
(-19.14)
-0.382***
(-21.95)
-0.162***
(-8.15)

60

Electronic copy available at: https://ssrn.com/abstract=2641078

High Low
-1.370**
(-2.60)
-0.494***
(-4.06)
-0.251***
(-2.77)

Panel B: Abnormal stock returns, univariate quintile sorts (by DHERF)
Sample

World Market (WM)-adj.
Local Market (LM)-adj.
DGTW-adj.

Merger Announcement [0,1]

Antitrust Approval [0,1]

1 (Low)

2

3

4

5 (High)

0.330***
(3.17)
0.203
(1.63)
0.144
(0.94)

0.366***
(4.27)
0.199***
(3.55)
0.079
(1.67)

0.304**
(2.32)
0.151
(1.45)
0.051
(0.45)

0.322***
(4.94)
0.185***
(2.79)
0.043
(0.67)

0.103***
(4.90)
-0.033**
(-2.51)
-0.129***
(-11.03)

High Low
-0.228**
(-2.22)
-0.235*
(-1.89)
-0.272*
(-1.77)

1 (Low)

2

3

4

5 (High)

0.560
(1.39)
0.119
(1.43)
0.098
(1.35)

0.328
(0.71)
0.038
(0.45)
0.137
(1.60)

-0.005
(-0.01)
-0.036
(-0.45)
0.030
(0.62)

-0.518***
(-5.28)
-0.299***
(-7.25)
-0.174***
(-7.60)

-0.620***
(-17.79)
-0.347***
(-10.08)
-0.127***
(-8.34)

High Low
-1.220***
(-2.94)
-0.467***
(-4.75)
-0.225***
(-2.92)

Panel C: Abnormal stock returns, panel regressions – Antitrust approval event
Sample

Antitrust Approval [-20, 20]

Treatment variable
Dependent variable: Daily abnormal returns
Treatment Quintiles × [-5, -1]
Treatment Quintiles × [0, 1]
Treatment Quintiles × [2, 6]
Treatment Quintiles × [7, 20]
Passive Residual IO Quintiles × [-5, -1]
Passive Residual IO Quintiles × [0, 1]
Passive Residual IO Quintiles × [2, 6]
Passive Residual IO Quintiles × [7, 20]
Unreported
Fixed Effects
Observations
Adjusted R2

IO BR+BGI
WM-adj.

LM-adj.

DHERF
DGTW-adj.

(1)
(2)
(3)
0.0140
0.0297
0.0402
(0.14)
(0.71)
(1.00)
-0.3894**
-0.1141***
-0.0605***
(-2.31)
(-3.13)
(-2.79)
-0.0533
-0.0775*
-0.0627*
(-0.36)
(-1.83)
(-1.94)
0.0227
-0.0140
-0.0068
(0.27)
(-0.40)
(-0.23)
-0.0064
0.0065
-0.0072
(-0.07)
(0.22)
(-0.33)
-0.0197
-0.0757
-0.0310
(-0.16)
(-1.68)
(-0.94)
-0.1046
-0.0303
-0.0160
(-0.81)
(-0.53)
(-0.36)
-0.0274
-0.0056
-0.0041
(-0.40)
(-0.18)
(-0.15)
Controls, controls × event indicators, country-specific turn
of month & turn of week effects
Stock & trading day
225,781
225,781
222,117
0.01
0.00
-0.00

WM-adj.

LM-adj.

DGTW-adj.

(4)
(5)
(6)
0.0238
0.0175
0.0339
(0.26)
(0.48)
(0.92)
-0.3510**
-0.0984***
-0.0360**
(-2.06)
(-4.70)
(-2.02)
-0.0434
-0.0695**
-0.0517**
(-0.31)
(-2.14)
(-2.34)
0.0176
-0.0096
0.0015
(0.22)
(-0.33)
(0.06)
-0.0145
0.0151
-0.0034
(-0.17)
(0.43)
(-0.11)
-0.0383
-0.0847
-0.0506
(-0.31)
(-1.36)
(-1.20)
-0.1114
-0.0351
-0.0235
(-0.86)
(-0.54)
(-0.45)
-0.0237
-0.0088
-0.0105
(-0.36)
(-0.28)
(-0.39)
Controls, controls × event indicators, country-specific
turn of month & turn of week effects
Stock & trading day
225,781
225,781
222,117
0.01
0.00
-0.00

61

Electronic copy available at: https://ssrn.com/abstract=2641078

Panel D: Stock liquidity measured by Amihud
Sample

BGI For
Sale

Treatment variable

Passive Res. IO Q. × [2, 60]
Unreported
Fixed effects
Observations
Adjusted R2

Antitrust
Approval

Deal
Completion

BGI For
Sale

Merger
Announcement

IO BR+BGI

Dependent variable
Treatment Q. × [2, 60]

Merger
Announcement

Antitrust
Approval

Deal
Completion

DHERF

Amihud

Amihud

(1)
(2)
(3)
(4)
0.0009
0.0019**
0.0028***
0.0031***
(1.35)
(2.52)
(3.46)
(3.70)
0.0037***
0.0052***
0.0051***
0.0054***
(4.96)
(6.36)
(6.02)
(6.03)
Controls, controls × event indicators, country-specific turn of month
& turn of week effects
Stock & trading day
607,282
616,144
614,291
611,409
0.38
0.37
0.36
0.35

(5)
(6)
(7)
(8)
0.0004
0.0018**
0.0022**
0.0027***
(0.50)
(2.06)
(2.37)
(2.92)
0.0041***
0.0053***
0.0056***
0.0057***
(5.01)
(5.96)
(6.04)
(5.94)
Controls, controls × event indicators, country-specific turn of month
& turn of week effects
Stock & trading day
607,282
616,144
614,291
611,409
0.38
0.37
0.36
0.35

Panel E: Stock liquidity measured by Log TradingVolume
Sample
Treatment variable
Dependent variable
Treatment Q. × [2, 60]
Passive Res. IO Q. × [2, 60]
Unreported
Fixed effects
Observations
Adjusted R2

BGI For
Sale

Merger
Announcement

Antitrust
Approval

Deal
Completion

BGI For
Sale

Merger
Announcement

IO BR+BGI

Antitrust
Approval

Deal
Completion

DHERF

Log TradingVolume

Log TradingVolume

(1)
(2)
(3)
(4)
0.0067
-0.0022
-0.0086
-0.0270**
(1.00)
(-0.24)
(-0.90)
(-2.59)
-0.0301***
-0.0449***
-0.0574***
-0.0601***
(-4.10)
(-4.83)
(-5.78)
(-5.79)
Controls, controls × event indicators, country-specific turn of month
& turn of week effects
Stock & trading day
607,934
616,842
614,975
612,110
0.91
0.90
0.90
0.90

(5)
(6)
(7)
(8)
0.0172**
0.0003
-0.0014
-0.0231**
(2.59)
(0.03)
(-0.14)
(-2.28)
-0.0385***
-0.0469***
-0.0629***
-0.0626***
(-5.18)
(-5.04)
(-6.05)
(-5.85)
Controls, controls × event indicators, country-specific turn of month
& turn of week effects
Stock & trading day
607,934
616,842
614,975
612,110
0.91
0.90
0.90
0.90

62

Electronic copy available at: https://ssrn.com/abstract=2641078

Table 7: Changes in stock price fragility and volatility following the merger
This table reports multivariate analysis of the fragility measure of Greenwood and Thesmar (2011) in Panels A and B (including
its decomposition into its diagonal and off-diagonal terms as in equation (14) in Greenwood and Thesmar (2011)) and test on
changes in stock return volatility in Panel C. In Panels A and B, the estimated panel regressions are:
√𝐹𝑟𝑎𝑔𝑖𝑙𝑖𝑡𝑦𝑠𝑡+1 = 𝛽1 𝑃𝑜𝑠𝑡𝑡 × 𝑇𝑠 + 𝛽2 𝑃𝑜𝑠𝑡𝑡 × 𝑃𝑎𝑠𝑠𝑖𝑣𝑒 𝑅𝑒𝑠. 𝐼𝑂𝑠 + 𝛾1 ′(𝑃𝑜𝑠𝑡𝑡 × 𝑋𝑠𝑡 ) + 𝛾2 ′𝑋𝑠𝑡 + 𝛼𝑡 + 𝛼𝑠 + 𝜖𝑠𝑡+1 ,
where the dependent variables include two alternate versions of the fragility measure of Greenwood and Thesmar (2011). We take
the square root of all fragility variables as in Greenwood and Thesmar (2011) but compute all fragility variables using firm-level
measures of stock ownership. In Column 1 to 3, 𝐹𝑟𝑎𝑔𝑖𝑙𝑖𝑡𝑦𝑠𝑡+1 and its decomposition into diagonal and off-diagonal terms are
computed from the sample of open-end funds only and their monthly flow histories. In Columns 4 to 6, we present an alternative
version that is based on the holdings of all funds in FactSet (i.e., including open-end and non-open-end funds). As flow data is not
available for all funds, we infer fund-level flows from semi-annual portfolio holdings and holding-returns. The sample includes all
stocks held by at least one BGI fund as of June 2009. In Panel A, the treatment variable is 𝐼𝑂 𝐵𝑅 + 𝐵𝐺𝐼𝑠 , in Panel B, the treatment
variable is 𝐷𝐻𝐸𝑅𝐹𝑠 . All other specifications are unchanged and * / ** / *** indicate statistical significance at the 10% / 5% / 1%
level respectively, computed from standard errors that allow for clustering at the stock level. Panel C examines changes in stock
return volatility. The panel is structured at the monthly frequency, covering 24 months symmetric around the merger announcement
in June 2009. The estimated regression equation is:
𝑉𝑜𝑙𝑎𝑡𝑖𝑙𝑖𝑡𝑦𝑠𝑡 = 𝛽1 𝑃𝑜𝑠𝑡𝑡 × 𝑇𝑠 + 𝛽2 𝑃𝑜𝑠𝑡𝑡 × 𝑃𝑎𝑠𝑠𝑖𝑣𝑒 𝑅𝑒𝑠. 𝐼𝑂𝑠 + 𝛾1′ (𝑃𝑜𝑠𝑡𝑡 × 𝑋𝑠𝑡 ) + 𝛾2′ 𝑋𝑠𝑡 + 𝛼𝑡 + 𝛼𝑠 + 𝜖𝑠𝑡 .
The dependent variable includes the measures of monthly stock return volatility: 𝑉𝑜𝑙𝑎𝑡𝑖𝑙𝑖𝑡𝑦𝑠𝑡 is monthly stock volatility measured
from daily stock returns of stock s during month t. We present two measures of monthly stock volatility: 𝑇𝑜𝑡𝑎𝑙𝑉𝑜𝑙𝑠𝑡 is the total
stock volatility measures as the annualized standard deviation of daily stock returns of stock s in month t, 𝐼𝑑𝑖𝑜𝑉𝑜𝑙𝑠𝑡 is the
annualized standard deviation of the residuals of a first-stage regression of daily stock returns of stock s in month t on domestic
market, size, value, and momentum factors. 𝑃𝑜𝑠𝑡𝑡 is a vector containing three indicators for different periods in the BlackRockBGI merger process: 𝐹𝑜𝑟𝑆𝑎𝑙𝑒𝑡 is equal to 1 for the period March to May 2009 (i.e., the months following and including the
announcement by Barclays that BGI is for sale) and 0 otherwise, 𝐴𝑛𝑛𝑜𝑢𝑛𝑐𝑒𝑡 is equal to 1 for the period June to November 2009
(i.e., the months starting with the merger announcement in June, covering the antitrust approval in September 2009, up to November
2009) and 0 otherwise, and 𝐶𝑜𝑚𝑝𝑙𝑒𝑡𝑒𝑡 is an indicator equal to 1 for the months December 2009 to May 2010 (i.e., the period
following the deal completion) and 0 otherwise. All other specifications are as before and the panel includes specifications using
the treatment variable IO BR+BGI or the alternative treatment variable DHERF. * / ** / *** indicate statistical significance at the
10% / 5% / 1% level respectively, computed from standard errors that allow for double clustering at the stock and month level.

Panel A: Fragility, treatment variable IO BR+BGI
Dependent variable

√𝐹𝑟𝑎𝑔𝑖𝑙𝑖𝑡𝑦 (𝑂𝐸𝐹 𝑜𝑛𝑙𝑦)
All terms

Pre 1 × Treatment Quintiles
Post 1 × Treatment Quintiles
Post 2 × Treatment Quintiles
Pre 1 × Passive Res. IO Q.
Post 1 × Passive Res. IO Q.
Post 2 × Passive Res. IO Q.
Unreported
Fixed effects
Observations
Adjusted R2

Diagonal
terms

Off-diagonal
terms

(1)
(2)
(3)
-0.0005
-0.0006
0.0006
(-0.69)
(-0.98)
(1.37)
0.0039***
0.0039***
0.0015***
(5.03)
(5.29)
(3.16)
0.0022**
0.0024**
0.0014**
(2.23)
(2.57)
(2.46)
0.0003
0.0000
0.0005
(0.36)
(0.04)
(1.24)
-0.0013*
-0.0013*
-0.0005
(-1.67)
(-1.65)
(-1.29)
-0.0014
-0.0017*
0.0000
(-1.47)
(-1.83)
(0.05)
Controls, controls × period indicators
Stock & period
21,066
21,066
21,066
0.72
0.71
0.66

√𝐹𝑟𝑎𝑔𝑖𝑙𝑖𝑡𝑦 (𝐴𝑙𝑙 𝑓𝑢𝑛𝑑𝑠)
All terms

Diagonal
terms

Off-diagonal
terms

(4)
(5)
(6)
0.0027
0.0007
0.0007
(1.21)
(0.39)
(0.41)
-0.0065**
-0.0070***
-0.0027
(-2.44)
(-3.17)
(-1.32)
-0.0085**
-0.0071***
-0.0038
(-2.56)
(-2.58)
(-1.44)
-0.0009
-0.0010
0.0004
(-0.41)
(-0.55)
(0.27)
-0.0012
-0.0007
-0.0009
(-0.46)
(-0.32)
(-0.43)
-0.0009
-0.0005
0.0017
(-0.27)
(-0.18)
(0.65)
Controls, controls × period indicators
Stock & period
21,057
21,057
21,057
0.88
0.86
0.86

63

Electronic copy available at: https://ssrn.com/abstract=2641078

Panel B: Fragility, treatment variable DHERF
Dependent variable

√𝐹𝑟𝑎𝑔𝑖𝑙𝑖𝑡𝑦 (𝑂𝐸𝐹 𝑜𝑛𝑙𝑦)
All terms

Pre 1 × Treatment Quintiles
Post 1 × Treatment Quintiles
Post 2 × Treatment Quintiles
Pre 1 × Passive Res. IO Q.
Post 1 × Passive Res. IO Q.
Post 2 × Passive Res. IO Q.
Unreported
Fixed effects
Observations
Adjusted R2

Diagonal
terms

Off-diagonal
terms

(1)
(2)
(3)
0.0000
-0.0002
0.0006
(0.03)
(-0.37)
(1.26)
0.0027***
0.0028***
0.0005
(3.44)
(3.85)
(1.13)
0.0015
0.0018*
0.0008
(1.56)
(1.96)
(1.36)
-0.0000
-0.0002
0.0005
(-0.06)
(-0.31)
(1.27)
-0.0006
-0.0007
0.0000
(-0.77)
(-0.86)
(0.03)
-0.0010
-0.0013
0.0004
(-1.06)
(-1.46)
(0.73)
Controls, controls × period indicators
Stock & period
21,066
21,066
21,066
0.72
0.71
0.66

√𝐹𝑟𝑎𝑔𝑖𝑙𝑖𝑡𝑦 (𝐴𝑙𝑙 𝑓𝑢𝑛𝑑𝑠)
All terms

Diagonal
terms

Off-diagonal
terms

(4)
(5)
(6)
0.0001
-0.0012
-0.0006
(0.04)
(-0.72)
(-0.37)
-0.0082***
-0.0071***
-0.0041**
(-3.24)
(-3.39)
(-2.00)
-0.0099***
-0.0073***
-0.0050*
(-3.09)
(-2.74)
(-1.84)
0.0006
0.0002
0.0012
(0.30)
(0.12)
(0.73)
-0.0001
-0.0006
-0.0001
(-0.04)
(-0.27)
(-0.04)
0.0001
-0.0003
0.0024
(0.04)
(-0.11)
(0.93)
Controls, controls × period indicators
Stock & period
21,057
21,057
21,057
0.88
0.86
0.86

Panel C: Volatility, monthly panel regressions
Treatment variable

IO BR+BGI

Dependent variable

Total Vol

For Sale × Treatment Quintiles
Announce × Treatment Quintiles
Complete × Treatment Quintiles
For Sale × Passive Res. IO Quintiles
Announce × Passive Res. IO Quintiles
Complete × Passive Res. IO Quintiles
Unreported
Fixed effects
Observations
Adjusted R2

Idiosyncratic
Vol
(1)
(2)
0.0005
0.0012
(1.01)
(1.25)
-0.0010**
-0.0018**
(-2.73)
(-2.42)
-0.0013***
-0.0023**
(-2.82)
(-2.60)
0.0018*
0.0030*
(2.02)
(1.91)
-0.0007
-0.0017**
(-1.71)
(-2.12)
-0.0006
-0.0016*
(-1.46)
(-1.87)
Controls, controls × period
indicators
Stock, Period
125,361
125,355
0.63
0.65

DHERF
Total Vol

Idiosyncratic
Vol
(3)
(4)
0.0005
0.0013
(1.25)
(1.39)
-0.0013***
-0.0022***
(-3.19)
(-2.86)
-0.0014***
-0.0025***
(-3.23)
(-2.90)
0.0017*
0.0029*
(1.92)
(1.87)
-0.0005
-0.0014*
(-1.21)
(-1.73)
-0.0005
-0.0014*
(-1.16)
(-1.73)
Controls, controls × period
indicators
Stock, Period
125,361
125,355
0.64
0.65

64

Electronic copy available at: https://ssrn.com/abstract=2641078

Table 8: Evidence from other asset management mergers
This table replicates the main results on the full sample of asset management mergers excluding mergers that fall in the BlackRock-BGI merger event period (i.e., excluding mergers
completed in the years 2008, 2009, and 2010). Specifications mirror the corresponding ones from the previous tables. Panel A examines portfolio rebalancing by residual institutional
investors (i.e., all institutional investors that are affiliated with neither the buyer nor the target). The dependent variables Δ𝑆ℎ𝑎𝑟𝑒𝑠𝐻𝑒𝑙𝑑𝑠𝑑𝑡+1 or %𝑁𝑒𝑡𝐵𝑢𝑦𝑠𝑑𝑡+1 are defined deal-bydeal as in Table 2. The treatment variables 𝑇𝑑𝑠 are 𝐼𝑂 𝐵𝑢𝑦𝑒𝑟 + 𝑇𝑎𝑟𝑔𝑒𝑡𝑑𝑠 or, alternatively, 𝐷𝐻𝐸𝑅𝐹𝑑𝑠 , both of which are defined analogously to their counterparts in the BlackRockBGI merger and measured as of the period prior to the merger completion date. The sample period covers the symmetric two semi-annual periods around the merger announcement
date and the sample includes, for a given deal d, all stocks held by at least one fund of the target prior to the merger. The estimated regression is:
Δ𝑆ℎ𝑎𝑟𝑒𝑠𝐻𝑒𝑙𝑑𝑑𝑠𝑡+1 = 𝛽1 𝑇𝑑𝑠 + 𝛽2 𝑃𝑜𝑠𝑡𝑑𝑡 + 𝛽3 𝑃𝑜𝑠𝑡𝑑𝑡 × 𝑇𝑑𝑠 + 𝛾1 ′(𝑃𝑜𝑠𝑡𝑑𝑡 × 𝑋𝑠𝑡 ) + 𝛾2 ′𝑋𝑠𝑡 + 𝛼𝑡 + 𝛼𝑠 + 𝛼𝑑 + 𝜖𝑠𝑑𝑡+1 .
The main coefficient of interest is 𝛽3 on the interaction term between the deal-specific post-merger indicator 𝑃𝑜𝑠𝑡𝑑𝑡 that is equal to 1 for the two semi-annual periods following the
announcement of deal d and 0 otherwise (alternatively, 𝑃𝑜𝑠𝑡𝑑𝑡 contains three period-specific indicators 𝑃𝑟𝑒1𝑑𝑡 , 𝑃𝑜𝑠𝑡1𝑑𝑡 , or 𝑃𝑜𝑠𝑡2𝑑𝑡 as before) and the treatment variable 𝑇𝑑𝑠 . All
other specifications are as in Table 2 with the addition of deal fixed effects denoted by 𝛼𝑑 and standard errors that are clustered at the stock-level. To save notation, we include the
measure of residual institutional ownership 𝑅𝑒𝑠𝑖𝑑𝑢𝑎𝑙 𝐼𝑂𝑠𝑡 in the vector 𝑋𝑠𝑡 . Panel B examines stock market effects. As we are unable to reconstruct the exact evolution of each
merger at the same level of detail as the BlackRock-BGI merger, we estimate the specification at the monthly frequency and examine abnormal returns and liquidity in different
periods around the merger process. The specifications are as above and the vector 𝑃𝑜𝑠𝑡𝑑𝑡 now contains indicators for three specific time periods: 𝐶𝑜𝑚𝑝𝑙𝑒𝑡𝑖𝑜𝑛𝑑𝑡 is an indicator equal
to 1 for all months following the merger completion and 0 otherwise, 𝑀&𝐴 𝑃𝑟𝑜𝑐𝑒𝑠𝑠𝑑𝑡 is an indicator equal to 1 for the 3 months prior to the merger completion date and 0 otherwise,
and 𝑃𝑟𝑒𝑑𝑡 is an indicator equal to 1 for the 3 months prior to the months in 𝑀&𝐴 𝑃𝑟𝑜𝑐𝑒𝑠𝑠𝑑𝑡 . The dependent variables include the same measures of monthly abnormal stock returns
and liquidity. All other specifications are unchanged. * / ** / *** indicate statistical significance at the 10% / 5% / 1% level, computed from standard errors that are clustered at
stock-level.

Panel A: Portfolio rebalancing by residual funds
Sample

All mergers

Treatment variable

IO Buyer + Target

Post × Treatment Quintiles
Pre 1 × Treatment
Post 1 × Treatment
Post 2 × Treatment

IO Buyer + Target

ΔSharesHeld

Dependent variable
Post × Treatment

DHERF

(1)
-1.7880***
(-2.67)

(2)

DHERF

% NetBuy

(3)

(4)

(5)

-0.0042***
(-3.33)

(6)

(7)

(8)

0.0002
(0.16)
-0.0055***
(-3.47)
-0.0053***
(-3.26)

-0.0004
(-0.27)
-0.0111***
(-6.75)
-0.0144***
(-8.57)

-0.0058***
(-4.98)
0.0211
(0.03)
-3.0760***
(-3.11)
-2.0806**
(-2.51)

Pre 1 × Treatment Quintiles

-0.0021
(-1.15)
-0.0100***
(-4.90)
-0.0118***
(-5.92)

Post 1 × Treatment Quintiles
Post 2 × Treatment Quintiles

-0.0005
(-0.26)
-0.0057**
(-2.45)
-0.0071***
(-3.14)

65

Electronic copy available at: https://ssrn.com/abstract=2641078

Post × Residual IO

0.0284
(1.27)

Post × Residual IO Quintiles

0.0000
(0.01)

Pre 1 × Residual IO

0.0282
(1.15)
0.0649**
(2.11)
0.0722***
(2.86)

Post 1 × Residual IO
Post 2 × Residual IO
Pre 1 × Residual IO Quintiles
Post 1 × Residual IO Quintiles
Post 2 × Residual IO Quintiles
Unreported
Fixed effects
Observations
Adjusted R2

0.0015
(1.10)

44,163
0.26

0.0006
(0.30)
0.0019
(0.86)
0.0031
(1.47)
Controls, controls × period indicators
Deal, stock & period
44,163
44,163
44,163
0.26
0.26
0.26

0.0008
(0.45)
0.0030
(1.39)
0.0044**
(2.13)

44,163
0.25

66

Electronic copy available at: https://ssrn.com/abstract=2641078

-0.0007
-0.0006
(-0.46)
(-0.37)
-0.0016
-0.0005
(-0.87)
(-0.27)
0.0018
0.0031*
(0.97)
(1.74)
Controls, controls × period indicators
Deal, stock & period
44,163
44,163
44,163
0.28
0.28
0.28

Panel B: Stock market effects
Sample

All mergers

Treatment variable
Dependent variable

Pre ×
Treatment Q.
M&A Process ×
Treatment Q.
Completion ×
Treatment Q.
Pre ×
Residual IO Q.
M&A Process ×
Residual IO Q.
Completion ×
Residual IO Q.
Unreported
Fixed effects
Observations
Adjusted R2

IO Buyer + Target
WM-adj.
returns

LM-adj.
returns

(1)
-0.0230
(-0.67)
-0.186***
(-5.48)
-0.0179
(-0.70)
-0.0388
(-1.10)
0.0848
(0.25)
0.6494**
(2.43)

(2)
(3)
(4)
-0.0239
-0.0507
-0.0000
(-0.66)
(-1.57)
(-0.37)
-0.195***
-0.110***
0.0001***
(-5.46)
(-3.45)
(2.73)
-0.0189
0.0067
0.0001***
(-0.70)
(0.28)
(3.29)
-0.0409
-0.0122
0.0000
(-1.10)
(-0.37)
(0.32)
0.0897
-0.3827
0.0005
(0.25)
(-1.20)
(0.90)
0.6837**
0.1581
0.0003
(2.43)
(0.65)
(0.59)
Controls, controls × period indicators
Deal, stock & period
265,873
265,873
265,873
0.02
0.02
0.68

265,873
0.02

DGTWadj. returns

DHERF
Amihud

Log
Trading
Vol.

WM-adj.
returns

(5)
-0.0031
(-1.12)
-0.016***
(-5.09)
-0.014***
(-3.96)
0.0157***
(5.00)
0.2536***
(6.22)
0.2489***
(5.45)

(6)
-0.0363
(-1.24)
-0.1447***
(-4.79)
-0.0724***
(-3.03)
-0.0285
(-0.82)
0.2057
(0.59)
0.7224***
(2.68)

265,873
0.95

265,873
0.03

LM-adj.
returns

DGTWadj. returns

Amihud

(7)
(8)
(9)
-0.0381
-0.0187
0.0001
(-1.23)
(-0.70)
(1.44)
-0.1520***
-0.1189***
0.0002***
(-4.78)
(-4.21)
(3.54)
-0.0762***
-0.0744***
0.0001
(-3.03)
(-3.39)
(1.50)
-0.0300
-0.0108
0.0000
(-0.82)
(-0.34)
(0.77)
0.2167
-0.2784
0.0003
(0.59)
(-0.87)
(0.49)
0.7605***
0.2377
0.0002
(2.68)
(0.97)
(0.48)
Controls, controls × period indicator
Deal, stock & period
265,873
265,873
265,873
0.03
0.02
0.69

67

Electronic copy available at: https://ssrn.com/abstract=2641078

Log
Trading
Vol.
(10)
0.0043*
(1.68)
0.0011
(0.40)
-0.0097***
(-3.36)
0.0157***
(4.93)
0.2513***
(6.16)
0.2585***
(5.62)

265,873
0.95

Internet Appendix for “Who is Afraid of BlackRock”
This internet appendix presents additional results to complement those presented in the main body.
•

Table IA.1 presents tests on the change in flow correlations between BlackRock and BGI funds
before and after the merger.

•

Table IA.2 presents robustness test for Table 2 including sub-sample tests (including the subsample of overlapping stocks), tests with the alternative treatment variable 𝐷𝐻𝐸𝑅𝐹𝑠 , additional
specifications for small cap and illiquid stocks, and tests for reversals in portfolio rebalancing.

•

Table IA.3 presents robustness tests for Table 3 including tests with the alternative treatment
variable 𝐷𝐻𝐸𝑅𝐹𝑠 and the sub-sample of overlapping stocks.

•

Table IA.4 presents robustness tests for Table 4 including regression that only include one fund
characteristic at a time, tests with the alternative treatment variable 𝐷𝐻𝐸𝑅𝐹𝑠 , and tests with the
sample of overlapping stocks.

•

Table IA.5 presents robustness tests for Table 5 including tests with the treatment variables in raw
form and tests with the sample of overlapping stocks. The table also presents an additional placebo
tests that omits the actual treatment variable from the specification.

•

Table IA.6 presents robustness tests around placebo event dates.

•

Table IA.7 presents robustness tests for Table 6 including tests with the treatment variables in raw
form, tests with the alternative treatment variable 𝐷𝐻𝐸𝑅𝐹𝑠 , placebo tests around alternative dates
in the BlackRock-BGI merger process, and tests with the sample of overlapping stocks.

•

Table IA.8 examines the relationship between stock return volatility, fragility, and OEF ownership.

•

Table IA.9 presents robustness tests for Table 7 including tests with the treatment variables in raw
form and the sample of overlapping stocks.

•

Table IA.10 presents robustness tests for Table 8 including tests with the sample of overlapping
stocks. It also examines changes in stock price fragility and volatility following other asset
management mergers, analogous to the tests presented in Table 7 but for the sample of other asset
management mergers. The table also presents an additional placebo tests that omits the actual
treatment variable from the specification.

•

Table IA.11 presents additional tests to rule out an alternative interpretation of the results that
relates portfolio rebalancing and stock price reactions to expected changes in adverse selection.

•

Table IA.12 presents additional tests to rule out an alternative interpretation of the results that
relates portfolio rebalancing to expected changes in trading activities by BlackRock funds.

•

Table IA.13 replicates the main results from the BlackRock-BGI merger using 13F data to construct
an alternative version of our main treatment variable.
IA.1

Electronic copy available at: https://ssrn.com/abstract=2641078

Table IA.1: Changes in flow correlations
This table presents tests on the change in flow correlations between BlackRock and BGI funds around the merger. Panel A computes
average flow correlations between BlackRock, BGI, and residual funds for the pre- versus post-merger period as well as tests of
the difference between the two. Flow correlations are computed using 2 years of monthly flows for each fund in the pair (either the
2 years before the merger announcement in June 2009 or the 2 years after the deal completion in December 2009). The following
average correlations are included as observations: for each BGI fund, the average correlation of its flows with all BlackRock funds
before and after the merger (Column 1), for each residual fund, the average correlation with of its flows with each BlackRock fund
before and after the merger (Column 2), and for each residual fund, the average correlation with of its flows with each BGI fund
before and after the merger (Column 3). Panel B presents the same tests in a multi-variate framework where each of these average
flow correlation is considered as a separate observation. The main explanatory variables include 𝐵𝑙𝑎𝑐𝑘𝑅𝑜𝑐𝑘𝐵𝐺𝐼, defined as an
indicator equal to 1 if the flow correlation is between funds a BlackRock and BGI and 0 otherwise, 𝑃𝑜𝑠𝑡𝑡 as an indicator equal to
1 for the post-merger observations and 0 otherwise, and the interaction between the two. The regression further includes the fund
fixed effect and * / ** / *** indicate statistical significance at the 10% / 5% / 1% level, computed from standard errors that are
clustered at the fund-level.

Panel A: Changes in flow correlation between BlackRock, BGI, and Residual funds – univariate test
Flow correlation between

Pre
Post
Post – Pre

BlackRock & BGI funds

BGI & Residual funds

(1)

BlackRock & Residual
funds
(2)

-0.080%
3.663%
3.743%***

1.964%
2.104%
0.139%

0.461%
1.753%
1.292%***

(3)

Panel B: Changes in flow correlation between BlackRock, BGI, and Residual funds – multivariate test
(1)
Flow correlation
0.0303***
(6.02)
0.0072***
(8.95)
54,890
0.27

Post × BlackRockBGI
Post
Observations
Adjusted R2

IA.2

Electronic copy available at: https://ssrn.com/abstract=2641078

Table IA.2: Portfolio rebalancing by residual funds – Robustness tests
This table presents the robustness tests for Table 2. Panel A presents the portfolio rebalancing results for the overlapping subsample of stocks held by both BlackRock and BGI funds
as of June 2009 versus the non-overlapping subsample held by BGI funds. Column 1 uses the specification as in Table 2, Column 3 but replaces the variable 𝐼𝑂 𝐵𝑅 + 𝐵𝐺𝐼𝑠 with the
variable 𝑂𝑣𝑒𝑟𝑙𝑎𝑝𝑠 which is an indicator variable equal to 1 for the subsample of stocks held by both BlackRock and BGI funds and 0 otherwise. Columns 2 and 3 repeat the
specification of Table 2, Column 3 for the two subsamples of overlapping and non-overlapping stocks and Column 4 augments the specification of Table 2, Column 3 with triple
interaction terms between the overlap indicator, the period indicators, and the main variable 𝐼𝑂 𝐵𝑅 + 𝐵𝐺𝐼𝑠 . The remaining columns repeat specifications from Table 3 for the sample
of overlapping stocks only. Panels B and C repeat the specifications of Table 2 but uses the alternative treatment variable 𝐷𝐻𝐸𝑅𝐹𝑠 = (𝐼𝑂 𝐵𝑅 + 𝐼𝑂 𝐵𝐺𝐼)2 − 𝐼𝑂 𝐵𝑅2 − 𝐼𝑂 𝐵𝐺𝐼2
throughout and the sample of overlapping stocks only in Panel C. This alternative treatment variable measures the hypothetical increase in the Herfindahl-Hirschman index of firmlevel ownership concentration that would result from the merger between BlackRock and BGI, everything else equal. The table includes specifications where the variable is used in
either continuous form or transformed into quintiles and all other specifications are unchanged. Panel D repeats specifications as in Table 2 but extends the sample window to 5 semiannual periods before and after the event to examine long-run reversals in portfolio rebalancing. Panel E further analysis variation in portfolio rebalancing across stock characteristics,
in particular across measures of stock-level illiquidity. The two proxies for illiquidity include the inverse of size (measured by 𝑀𝐶𝐴𝑃) and the Amihud measure. Both variables are
measured as of June 2009 and transformed into an indicator equal to 1 if illiquidity is above the median in the sample and 0 otherwise. The specification is as in Table 2, Column 3
and 4 with the addition of triple-interaction terms to measure cross-sectional differences in portfolio rebalancing across liquid and illiquid stocks. All other specifications are
unchanged.

Panel A: Tests with overlapping stocks
Sample

All Stocks

Overlap = 0

Treatment variable

Post 1 × Overlap
Post 2 × Overlap
Pre 1 × Treatment
Post 1 × Treatment
Post 2 × Treatment

All Stocks

Overlap = 1

DHERF

(1)
-0.0110
(-0.69)
-0.0662***
(-4.03)
-0.0401**
(-2.51)

(2)

(3)

0.0180
(0.85)
0.0224
(0.97)
-0.0087
(-0.43)

0.5224**
(2.03)
-0.7648***
(-3.00)
-0.1739
(-0.65)

(4)
-0.0315
(-0.48)
-0.3670***
(-5.70)
-0.3019***
(-4.66)
0.0200
(1.53)
0.0246*
(1.88)
-0.0082
(-0.63)

IO BR+BGI

Post 1 × Treatment Quintiles
Post 2 × Treatment Quintiles

DHERF

% NetBuy
(5)

(6)

(7)

-3.0494
(-0.37)
-22.5920**
(-2.43)
-0.4894
(-0.05)

0.0785
(0.33)
-2.2599***
(-8.87)
-1.0452***
(-4.10)

0.0108***
(3.25)
-0.0076**
(-2.36)
-0.0028
(-0.82)

Pre 1 × Treatment Quintiles

Pre 1 × IO BR+BGI × Overlap

Overlap = 1

ΔSharesHeld

Dependent variable
Pre 1 × Overlap

Overlap = 1
IO BR+BGI

-0.0092
(-0.67)

IA.3

Electronic copy available at: https://ssrn.com/abstract=2641078

(8)

(9)

-14.0029*
(-1.67)
-55.0787***
(-4.98)
-10.7847
(-1.18)
0.0054*
(1.85)
-0.0277***
(-8.88)
-0.0176***
(-5.69)

Post 1 × IO BR+BGI
× Overlap
Post 2 × IO BR+BGI
× Overlap
Unreported
Fixed effects
Observations
Adjusted R2

22,732
0.11

5,559
0.09

-0.0351**
(-2.56)
0.0037
(0.27)
Controls, controls × period indicators
Stock & period
17,173
22,732
17,173
0.15
0.12
0.15

17,173
0.14

Controls, controls × period indicators
Stock & period
17,173
17,173
17,173
0.27
0.28
0.27

Panel B: Alternative treatment variable DHERF
ΔSharesHeld

Dependent variable
Post × DHERF

(1)
-17.9122**
(-2.52)

(2)

% NetBuy
(3)

-0.0163***
(-5.88)

Post × DHERF Quintiles
Pre 1 × DHERF

Post 2 × DHERF

Post 1 × DHERF Quintiles
Post 2 × DHERF Quintiles

Pastreturn
Log BTM
Dividend Yield
ROE
Leverage

(6)

-0.0364***
(-15.31)

Pre 1 × DHERF Quintiles

Log MCAP

(5)

-4.5326
(-0.53)
-35.5691***
(-3.51)
-8.0295
(-0.85)

Post 1 × DHERF

Δ IO BlackRock

(4)

1.0338**
(2.29)
-0.0392*
(-1.71)
0.1292***
(6.65)
0.0549**
(2.33)
-0.0025
(-1.27)
0.0005**
(2.14)
0.1004
(1.33)

0.9521**
(2.12)
-0.0381*
(-1.66)
0.1299***
(6.71)
0.0589**
(2.50)
-0.0016
(-0.82)
0.0005**
(2.29)
0.0876
(1.16)

0.6484
(0.88)
-0.0284
(-1.14)
0.1428***
(5.06)
0.0652**
(2.46)
-0.0057**
(-2.06)
0.0006**
(1.96)
0.1125
(1.43)

0.0008
(0.22)
-0.0198***
(-5.10)
-0.0122***
(-3.06)
0.6922
(1.01)
-0.0267
(-1.07)
0.1439***
(5.12)
0.0700***
(2.63)
-0.0049*
(-1.74)
0.0006**
(2.05)
0.1007
(1.28)

IA.4

Electronic copy available at: https://ssrn.com/abstract=2641078

1.2632***
(3.03)
-0.0628***
(-3.71)
0.1619***
(10.17)
0.0409**
(2.35)
-0.0028*
(-1.83)
0.0005***
(3.09)
-0.0024
(-0.04)

-0.0025
(-0.83)
-0.0465***
(-14.31)
-0.0289***
(-8.89)
0.8632
(1.32)
-0.0641***
(-3.61)
0.1730***
(7.01)
0.0448**
(2.37)
-0.0042*
(-1.82)
0.0005**
(2.55)
-0.0005
(-0.01)

Cash
Unreported
Fixed effects
Observations
Adjusted R2

0.0187
(0.33)

22,732
0.11

0.0301
-0.0111
(0.53)
(0.59)
Controls, controls × period indicators
Stock & period
22,732
22,732
0.11
0.11

-0.0004
(-0.01)

22,732
0.12

0.1138**
0.0702
(2.34)
(1.37)
Controls, controls × period indicators
Stock & period
22,732
22,732
0.22
0.23

Panel C: Alternative treatment variable DHERF, sample of overlapping stocks
ΔSharesHeld

Dependent variable
Post × DHERF

(1)
-8.3331
(-1.28)

(2)

% NetBuy
(3)

-0.0144***
(-5.14)

Post × DHERF Quintiles
Pre 1 × DHERF

Post 2 × DHERF

Post 1 × DHERF Quintiles
Post 2 × DHERF Quintiles

Pastreturn
Log BTM
Dividend Yield
ROE
Leverage
Cash

(6)

-0.0350***
(-12.16)

Pre 1 × DHERF Quintiles

Log MCAP

(5)

-3.0494
(-0.37)
-22.5920**
(-2.43)
-0.4894
(-0.05)

Post 1 × DHERF

Δ IO BlackRock

(4)

0.7844*
(1.91)
-0.0451*
(-1.75)
0.1318***
(9.70)
0.0419
(1.63)
-0.0027*
(-1.86)
0.0004**
(2.32)
0.0847
(1.10)
0.0675
(1.32)

0.6929*
(1.68)
-0.0429*
(-1.65)
0.1310***
(9.66)
0.0447*
(1.73)
-0.0022
(-1.49)
0.0004**
(2.26)
0.0751
(0.97)
0.0737
(1.44)

0.1094
(0.17)
-0.0310
(-1.12)
0.1619***
(8.46)
0.0471*
(1.66)
-0.0058***
(-2.65)
0.0004**
(2.12)
0.0851
(1.08)
0.0336
(0.59)

0.0065**
(2.12)
-0.0092***
(-3.10)
-0.0046
(-1.42)
0.2202
(0.37)
-0.0301
(-1.08)
0.1617***
(8.46)
0.0483*
(1.69)
-0.0055**
(-2.52)
0.0004**
(2.09)
0.0744
(0.94)
0.0362
(0.63)

IA.5

Electronic copy available at: https://ssrn.com/abstract=2641078

1.0928***
(2.69)
-0.0886***
(-4.79)
0.1676***
(15.01)
0.0194
(1.05)
-0.0032*
(-1.96)
0.0005***
(3.44)
-0.0125
(-0.21)
0.1514***
(2.95)

0.0009
(0.30)
-0.0322***
(-10.71)
-0.0197***
(-6.42)
0.4552
(0.72)
-0.0861***
(-4.49)
0.2042***
(12.36)
0.0192
(0.98)
-0.0064**
(-2.57)
0.0004***
(2.68)
-0.0149
(-0.24)
0.0998*
(1.87)

Unreported
Fixed effects
Observations
Adjusted R2

17,173
0.14

Controls, controls × period indicators
Stock & period
17,173
17,173
0.14
0.14

Controls, controls × period indicators
Stock & period
17,173
17,173
0.27
0.22

17,173
0.15

Panel D: Testing for reversals
Treatment variable

IO BR+BGI

Post 1 × Treatment
Post 2-3 × Treatment
Post 4-5 × Treatment
Pre 1 × Treatment Quintiles
Post 1 × Treatment Quintiles
Post 2-3 × Treatment Quintiles
Post 4-5 × Treatment Quintiles
Unreported
Fixed effects
Observations
Adjusted R2

IO BR+BGI

ΔSharesHeld

Dependent variable
Pre 1 × Treatment

DHERF

(1)
0.2021
(0.88)
-1.0846***
(-4.59)
-0.8962
(-1.79)
-0.3603
(-1.04)

DHERF

% NetBuy

(2)

(3)

0.0040
0.0006
(1.30)
(0.22)
-0.0134***
-0.0122***
(-4.17)
(-3.95)
-0.0142*
-0.0122
(-2.01)
(-1.79)
-0.0079
-0.0075
(-1.71)
(-1.73)
Controls, controls × period indicators
Stock & period
48,573
48,573
48,573
0.06
0.06
0.06

(4)
0.4481
(1.16)
-2.5373***
(-5.99)
-1.7301**
(-2.44)
-0.3966
(-0.63)

(5)

(6)

0.0103*
0.0070
(1.90)
(1.41)
-0.0316***
-0.0258***
(-5.39)
(-4.86)
-0.0261**
-0.0215*
(-2.43)
(-2.11)
-0.0063
-0.0049
(-0.77)
(-0.66)
Controls, controls × period indicators
Stock & period
48,573
48,573
48,573
0.17
0.17
0.17

IA.6

Electronic copy available at: https://ssrn.com/abstract=2641078

Panel E: Triple interactions with stock characteristics
ΔSharesHeld

Dependent variable
Pre 1 × IO BR+BGI
Post 1 × IO BR+BGI
Post 2 × IO BR+BGI
Pre 1 × IO BR+BGI × MCAP dummy
Post 1 × IO BR+BGI × MCAP dummy
Post 2 × IO BR+BGI × MCAP dummy

(1)
0.0083
(0.03)
-1.0063***
(-4.23)
-0.1784
(-0.72)
0.3373
(0.65)
-0.7899
(-1.50)
-0.9723*
(-1.78)

Pre 1 × IO BR+BGI × AMIHUD dummy

(2)
-0.1444
(-0.44)
-1.0569***
(-3.28)
-0.1281
(-0.42)

0.5985
(0.94)
-1.0542
(-1.62)
-1.5570**
(-2.37)

Post 1 × IO BR+BGI × AMIHUD dummy
Post 2 × IO BR+BGI × AMIHUD dummy
Pre 1 × IO BR+BGI Q.
Post 1 × IO BR+BGI Q.
Post 2 × IO BR+BGI Q.
Pre 1 × IO BR+BGI Q. × MCAP dummy
Post 1 × IO BR+BGI Q. × MCAP dummy
Post 2 × IO BR+BGI Q. × MCAP dummy

(3)
-0.2511
(-0.91)
-0.9575***
(-3.51)
-0.1004
(-0.36)
0.1698
(0.27)
-0.3815
(-0.62)
-0.3874
(-0.62)
0.5220
(0.69)
-0.7951
(-1.07)
-1.3481*
(-1.82)

(4)

(5)

(6)

0.0016
(0.48)
-0.0130***
(-3.64)
-0.0040
(-1.10)
0.0036
(0.50)
-0.0083
(-1.16)
-0.0130*
(-1.74)

-0.0009
(-0.17)
-0.0146***
(-2.75)
-0.0017
(-0.34)

0.0066
(0.78)
-0.0071
(-0.86)
-0.0193**
(-2.32)

-0.0027
(-0.60)
-0.0138***
(-3.06)
-0.0019
(-0.40)
0.0028
(0.34)
-0.0047
(-0.56)
-0.0045
(-0.57)
0.0055
(0.55)
-0.0038
(-0.39)
-0.0163*
(-1.82)

22,732
0.12

22,732
0.12

Pre 1 × IO BR+BGI Q. × AMIHUD dummy
Post 1 × IO BR+BGI Q. × AMIHUD dummy
Post 2 × IO BR+BGI Q. × AMIHUD dummy
Unreported
Fixed effects
Observations
Adjusted R2

22,732
0.11

Controls, controls × period indicators
Stock & period
22,732
22,732
0.11
0.12

22,732
0.11

IA.7

Electronic copy available at: https://ssrn.com/abstract=2641078

Table IA.3: Portfolio rebalancing by fund type – Robustness tests
This table repeats specifications from Table 3 but uses the alternative treatment variable 𝐷𝐻𝐸𝑅𝐹𝑆 (in Panels A and B) and the sample of overlapping stocks (in Panels C and D). All
other specifications are unchanged.

Panel A: Sample splits by OEF and non-OEF funds – alternative treatment variable DHERF
Sample

OEF

Non-OEF

OEF

(1)
-45.4615***
(-3.93)

(2)
13.7610*
(1.94)

(3)

(4)

10.6962
(0.83)
-49.7991***
(-3.19)
-29.0383*
(-1.88)

5.7626
(0.52)
-0.1620
(-0.01)
32.0926**
(2.48)

Pre 1 × DHERF
Post 1 × DHERF
Post 2 × DHERF
Pre 1 × DHERF Quintiles
Post 1 × DHERF Quintiles
Post 2 × DHERF Quintiles
Unreported
Fixed effects
Observations
Adjusted R2

OEF

Non-OEF

(5)

(6)

0.0022
(0.52)
-0.0188***
(-4.16)
-0.0087*
(-1.72)

0.0188***
(3.93)
0.0128***
(2.60)
0.0323***
(6.28)

22,655
0.23

22,601
0.14

ΔSharesHeld

Dependent variable
Post × DHERF

Non-OEF

22,655
0.22

Controls, controls × period indicators
Stock & period
22,655
22,601
0.23
0.13

22,601
0.12

IA.8

Electronic copy available at: https://ssrn.com/abstract=2641078

Panel B: Changes in the composition of residual ownership – alternative treatment variable DHERF
Dependent variable
Post × DHERF

OEF IO
(1)
-4.1435**
(-2.09)

(2)

Total IO
(3)

(5)

(6)

-0.0008*
(-1.87)

Post × DHERF Quintiles
Pre 1 × DHERF

-3.1787
(-1.51)
-6.6074**
(-2.47)
-5.4045*
(-1.85)

Post 1 × DHERF
Post 2 × DHERF
Pre 1 × DHERF Quintiles

-3.2202
(-1.34)
-4.2357
(-1.51)
-3.6324
(-1.13)
-0.0002
(-0.42)
-0.0014***
(-2.82)
-0.0003
(-0.47)

Post 1 × DHERF Quintiles
Post 2 × DHERF Quintiles
Unreported
Fixed effects
Observations
Adjusted R2

(4)

21,209
0.94

Controls, controls × period indicators
Stock & period
21,209
21,209
0.94
0.94

21,209
0.94

IA.9

Electronic copy available at: https://ssrn.com/abstract=2641078

0.0006
(1.30)
0.0007
(1.12)
0.0018**
(2.18)
Controls, controls × period indicators
Stock & period
21,209
21,209
0.95
0.95

Panel C: Sample splits by OEF and Non-OEF funds – sample of overlapping stocks only
Sample

OEF

Non-OEF

OEF

Non-OEF

OEF

Non-OEF

Treatment variable

IO BR+BGI

DHERF

Dependent variable

ΔSharesHeld

ΔSharesHeld

Pre 1 × Treatment
Post 1 × Treatment
Post 2 × Treatment

(1)
0.6190**
(2.06)
-1.5370***
(-4.62)
-1.4446***
(-3.83)

Pre 1 × Treatment Quintiles
Post 1 × Treatment Quintiles
Post 2 × Treatment Quintiles
Unreported
Fixed effects
Observations
Adjusted R2

17,172
0.31

(2)
0.2614
(0.94)
0.0486
(0.16)
0.5593*
(1.68)

(3)

0.0088***
(2.61)
-0.0184***
(-4.80)
-0.0208***
(-4.60)
Controls, controls × period indicators
Stock & period
17,158
17,172
0.19
0.31

(4)

(5)
8.3245
(0.66)
-44.9711***
(-2.94)
-37.2357**
(-2.38)

(6)
-6.2757
(-0.69)
-7.4487
(-0.74)
5.4160
(0.52)

0.0057
(1.60)
0.0021
(0.53)
0.0073*
(1.68)

17,158
0.19

IA.10

Electronic copy available at: https://ssrn.com/abstract=2641078

Controls, controls × period indicators
Stock & period
17,172
17,158
0.31
0.19

Panel D: Changes in the composition of residual ownership – sample of overlapping stocks only
Treatment variable

IO BR+BGI

Dependent variable
Pre 1 × Treatment
Post 1 × Treatment
Post 2 × Treatment
Pre 1 × Treatment Quintiles
Post 1 × Treatment Quintiles
Post 2 × Treatment Quintiles
Unreported
Fixed effects
Observations
Adjusted R2

DHERF

IO BR+BGI

OEF IO
(1)
-0.0393
(-0.92)
-0.1872***
(-3.52)
-0.1477**
(-2.23)

(2)

DHERF
Total IO

(3)
-3.2132
(-1.49)
-6.4901**
(-2.36)
-6.1373**
(-2.02)

0.0002
(0.41)
-0.0016***
(-2.87)
-0.0010
(-1.33)
Controls, controls × period indicators
Stock & period
16,158
16,158
16,158
0.94
0.94
0.94

(4)
-0.0288
(-0.56)
-0.0834
(-1.29)
-0.0670
(-0.84)

(5)

(6)
-3.8069
(-1.53)
-5.1285
(-1.77)
-5.4189
(-1.62)

0.0007
(1.36)
0.0004
(0.51)
0.0009
(0.96)
Controls, controls × period indicators
Stock & period
16,158
16,158
16,158
0.95
0.95
0.95

IA.11

Electronic copy available at: https://ssrn.com/abstract=2641078

Table IA.4: Portfolio rebalancing by OEFs and fund characteristics – Robustness tests
This table presents robustness tests to Table 4. Panel A repeats the regression of Table 4 but only includes one fund characteristic
at a time. Panel B repeats Panel A here with the alternative treatment variable 𝐷𝐻𝐸𝑅𝐹𝑠 . Panels C and D repeat Table 4 of the main
body with the alternative treatment variable 𝐷𝐻𝐸𝑅𝐹𝑠 and, in Panel D, the sample of overlapping stocks. Panel E repeats Table 4
but uses the sample of overlapping stock throughout. All other specifications are unchanged.

Panel A: One fund characteristic per regression, treatment variable IO BR+BGI Quintiles
Sample

OEF only
ΔSharesHeld

Dependent variable
Pre 1 × IO BR+BGI Quintiles × FCORR BR / BGI
Post 1 × IO BR+BGI Quintiles × FCORR BR / BGI
Post 2 × IO BR+BGI Quintiles × FCORR BR / BGI

(1)
-0.0023
(-0.50)
-0.0291***
(-6.15)
-0.0139***
(-3.07)

Pre 1 × IO BR+BGI Quintiles × FCORR Residual

Post 2 × IO BR+BGI Quintiles × FCORR Residual
Pre 1 × IO BR+BGI Quintiles × EXWEIGHT

Post 2 × IO BR+BGI Quintiles × EXWEIGHT

Post 1 × IO BR+BGI Quintiles × CONC
Post 2 × IO BR+BGI Quintiles × CONC

Unreported
Fixed effects
Observations
Adjusted R2

(5)

0.0109***
(3.39)
-0.0070**
(-2.07)
-0.0302***
(-8.62)

Pre 1 × IO BR+BGI Quintiles × CONC

Post 2 × IO BR+BGI Quintiles × ILLIQ

(4)

-0.0030
(-0.78)
-0.0334***
(-8.44)
-0.0194***
(-4.78)

Post 1 × IO BR+BGI Quintiles × EXWEIGHT

Post 1 × IO BR+BGI Quintiles × ILLIQ

(3)

0.0042
(0.96)
-0.0186***
(-4.15)
-0.0134***
(-3.01)

Post 1 × IO BR+BGI Quintiles × FCORR Residual

Pre 1 × IO BR+BGI Quintiles × ILLIQ

(2)

-0.0043
(-1.37)
-0.0070**
(-2.17)
0.0007
(0.21)
Controls, interaction terms (simple and triple interaction terms for
controls and fund characteristics)
Fund, Stock, Period
2,332,811
2,297,072
3,101,609
4,155,228
4,155,218
0.05
0.04
0.06
0.05
0.05

IA.12

Electronic copy available at: https://ssrn.com/abstract=2641078

Panel B: One fund characteristic per regression, treatment variable DHERF Quintiles
Sample

OEF only
ΔSharesHeld

Dependent variable
Pre 1 × DHERF Quintiles × FCORR BR / BGI
Post 1 × DHERF Quintiles × FCORR BR / BGI
Post 2 × DHERF Quintiles × FCORR BR / BGI

(1)
-0.0092**
(-2.11)
-0.0286***
(-6.43)
-0.0168***
(-3.87)

Pre 1 × DHERF Quintiles × FCORR Residual

Post 2 × DHERF Quintiles × FCORR Residual
Pre 1 × DHERF Quintiles × EXWEIGHT

Post 2 × DHERF Quintiles × EXWEIGHT

Post 1 × DHERF Quintiles × CONC
Post 2 × DHERF Quintiles × CONC

Unreported
Fixed effects
Observations
Adjusted R2

(5)

0.0121***
(3.90)
-0.0057*
(-1.76)
-0.0286***
(-8.63)

Pre 1 × DHERF Quintiles × CONC

Post 2 × DHERF Quintiles × ILLIQ

(4)

-0.0034
(-0.93)
-0.0323***
(-8.44)
-0.0218***
(-5.58)

Post 1 × DHERF Quintiles × EXWEIGHT

Post 1 × DHERF Quintiles × ILLIQ

(3)

0.0012
(0.30)
-0.0155***
(-3.72)
-0.0135***
(-3.20)

Post 1 × DHERF Quintiles × FCORR Residual

Pre 1 × DHERF Quintiles × ILLIQ

(2)

-0.0039
(-1.31)
-0.0087***
(-2.82)
-0.0009
(-0.28)
Controls, interaction terms (simple and triple interaction terms for
controls and fund characteristics)
Fund, Stock, Period
2,332,811
2,297,072
3,101,609
4,155,228
4,155,218
0.05
0.04
0.06
0.05
0.05

IA.13

Electronic copy available at: https://ssrn.com/abstract=2641078

Panel C: Portfolio rebalancing and fund characteristics (OEFs only), treatment variable DHERF Quintiles,
Sample

OEF only
ΔSharesHeld

Dependent variable
Pre 1 × DHERF Quintiles × FCORR BR / BGI
Post 1 × DHERF Quintiles × FCORR BR / BGI
Post 2 × DHERF Quintiles × FCORR BR / BGI
Pre 1 × DHERF Quintiles × FCORR Residual
Post 1 × DHERF Quintiles × FCORR Residual
Post 2 × DHERF Quintiles × FCORR Residual
Pre 1 × DHERF Quintiles × EXWEIGHT
Post 1 × DHERF Quintiles × EXWEIGHT
Post 2 × DHERF Quintiles × EXWEIGHT
Pre 1 × DHERF Quintiles × CONC
Post 1 × DHERF Quintiles × CONC
Post 2 × DHERF Quintiles × CONC
Pre 1 × DHERF Quintiles × ILLIQ
Post 1 × DHERF Quintiles × ILLIQ
Post 2 × DHERF Quintiles × ILLIQ
Unreported
Fixed effects
Observations
Adjusted R2

(1)
-0.0124***
(-2.80)
-0.0282***
(-6.26)
-0.0139***
(-3.17)
0.0053
(1.30)
-0.0062
(-1.50)
-0.0100**
(-2.40)

(2)

(3)

(4)
-0.0122***
(-2.77)
-0.0276***
(-6.12)
-0.0169***
(-3.79)
0.0039
(0.95)
-0.0109***
(-2.65)
-0.0131***
(-2.99)
-0.0068*
0.0004
(-1.89)
(0.10)
-0.0207***
-0.0338***
(-5.47)
(-7.10)
-0.0084**
-0.0248***
(-2.22)
(-5.23)
0.0128***
0.0157***
(3.57)
(3.29)
-0.0129***
-0.0191***
(-3.47)
(-3.85)
-0.0178***
-0.0243***
(-4.69)
(-4.78)
-0.0039
0.0027
(-1.31)
(0.62)
-0.0087***
-0.0146***
(-2.82)
(-3.22)
-0.0009
-0.0078*
(-0.28)
(-1.68)
Controls, interaction terms (simple and triple interaction terms for
controls and fund characteristics)
Fund, Stock, Period
2,291,487
3,101,371
4,155,218
2,029,093
0.04
0.07
0.05
0.07

IA.14

Electronic copy available at: https://ssrn.com/abstract=2641078

Panel D: Portfolio rebalancing and fund characteristics (OEFs only), treatment variable DHERF
Quintiles, on the sample of overlapping stocks only
Sample

OEF only
ΔSharesHeld

Dependent variable
Pre 1 × DHERF Quintiles × FCORR BR / BGI
Post 1 × DHERF Quintiles × FCORR BR / BGI
Post 2 × DHERF Quintiles × FCORR BR / BGI
Pre 1 × DHERF Quintiles × FCORR Residual
Post 1 × DHERF Quintiles × FCORR Residual
Post 2 × DHERF Quintiles × FCORR Residual
Pre 1 × DHERF Quintiles × EXWEIGHT
Post 1 × DHERF Quintiles × EXWEIGHT
Post 2 × DHERF Quintiles × EXWEIGHT
Pre 1 × DHERF Quintiles × CONC
Post 1 × DHERF Quintiles × CONC
Post 2 × DHERF Quintiles × CONC
Pre 1 × DHERF Quintiles × ILLIQ
Post 1 × DHERF Quintiles × ILLIQ
Post 2 × DHERF Quintiles × ILLIQ
Unreported
Fixed effects
Observations
Adjusted R2

(1)
-0.0141***
(-2.81)
-0.0332***
(-6.47)
-0.0242***
(-4.83)
0.0071
(1.55)
-0.0062
(-1.30)
-0.0076
(-1.58)

(2)

(3)

(4)
-0.0145***
(-2.92)
-0.0355***
(-6.94)
-0.0233***
(-4.57)
0.0051
(1.11)
-0.0106**
(-2.22)
-0.0133***
(-2.62)
-0.0062
-0.0012
(-1.51)
(-0.23)
-0.0313***
-0.0411***
(-7.38)
(-7.55)
-0.0165***
-0.0303***
(-3.90)
(-5.58)
0.0141***
0.0179***
(3.54)
(3.38)
-0.0171***
-0.0203***
(-3.98)
(-3.56)
-0.0241***
-0.0277***
(-5.57)
(-4.80)
-0.0060*
0.0020
(-1.77)
(0.40)
-0.0080**
0.0006
(-2.27)
(0.12)
-0.0035
0.0065
(-0.97)
(1.20)
Controls, interaction terms (simple and triple interaction terms for
controls and fund characteristics)
Fund, Stock, Period
2,198,234
2,954,507
3,912,460
1,951,103
0.04
0.06
0.04
0.06

IA.15

Electronic copy available at: https://ssrn.com/abstract=2641078

Panel E: Table 4 on the sample of overlapping stocks only
Sample

OEF only

Treatment variable

IO BR+BGI

Pre 1 × Treatment Q. × FCORR Residual
Post 1 × Treatment Q.× FCORR Residual
Post 2 × Treatment Q. × FCORR Residual
Pre 1 × Treatment Q. × FCORR BR / BGI
Post 1 × Treatment Q. × FCORR BR / BGI
Post 2 × Treatment Q.× FCORR BR / BGI

(1)
-0.0056
(-1.12)
-0.0310***
(-6.11)
-0.0202***
(-4.09)
0.0047
(1.02)
-0.0104**
(-2.21)
-0.0084*
(-1.77)

Pre 1 × Treatment Q. × EXWEIGHT
Post 1 × Treatment Q.× EXWEIGHT
Post 2 × Treatment Q. × EXWEIGHT
Pre 1 × Treatment Q.× CONC
Post 1 × Treatment Q. × CONC
Post 2 × Treatment Q.× CONC
Pre 1 × Treatment Q. × ILLIQ
Post 1 × Treatment Q. × ILLIQ
Post 2 × Treatment Q. × ILLIQ
Unreported
Fixed effects
Observations
Adjusted R2

DHERF

ΔSharesHeld

Dependent variable

2,198,234
0.04

(2)

(3)

(4)
-0.0058
(-1.17)
-0.0332***
(-6.46)
-0.0193***
(-3.83)
0.0028
(0.61)
-0.0135***
(-2.85)
-0.0165***
(-3.28)
-0.0078*
-0.0022
(-1.86)
(-0.42)
-0.0269***
-0.0377***
(-6.46)
(-7.13)
-0.0095**
-0.0245***
(-2.28)
(-4.58)
0.0122***
0.0147***
(3.09)
(2.78)
-0.0178***
-0.0221***
(-4.27)
(-3.97)
-0.0269***
-0.0301***
(-6.40)
(-5.25)
-0.0071**
-0.0001
(-2.12)
(-0.02)
-0.0051
0.0023
(-1.47)
(0.44)
-0.0002
0.0065
(-0.05)
(1.21)
Controls, simple and triple interaction terms
Fund, Stock, Period
2,954,507
3,912,460
1,951,103
0.06
0.04
0.06

IA.16

Electronic copy available at: https://ssrn.com/abstract=2641078

(5)
-0.0145***
(-2.92)
-0.0355***
(-6.94)
-0.0233***
(-4.57)
0.0051
(1.11)
-0.0106**
(-2.22)
-0.0133***
(-2.62)
-0.0012
(-0.23)
-0.0411***
(-7.55)
-0.0303***
(-5.58)
0.0179***
(3.38)
-0.0203***
(-3.56)
-0.0277***
(-4.80)
0.0020
(0.40)
0.0006
(0.12)
0.0065
(1.20)

1,951,103
0.06

Table IA.5: Portfolio rebalancing by OEFs, controlling for passive residual ownership – Robustness tests
This table presents robustness tests to Table 5. Panel A repeats Table 5 but uses the sample of overlapping stock throughout. Panels B and C implement the same tests on the expanded
sample at the fund-stock-period level used in Table 4 using the treatment variable in quintiles (Panel B) or in raw form (Panel C). Panel D repeats Table 4 but also adds the control
variable 𝑃𝑎𝑠𝑠𝑖𝑣𝑒 𝑅𝑒𝑠𝑖𝑑𝑢𝑎𝑙 𝐼𝑂𝑠 (and all interaction terms) to the specification. Panel E presents an additional placebo test that omits the treatment variable from the main specification
presented in Table 5. All other specifications are unchanged.

Panel A: Table 5 on the sample of overlapping stocks only
Sample

OEF only

Treatment variable

IO BR+BGI

DHERF
ΔSharesHeld

Dependent variable
Pre 1 × Treatment
Post 1 × Treatment
Post 2 × Treatment

(1)
0.3145
(0.92)
-1.2095***
(-3.26)
-1.4946***
(-3.15)

Pre 1 × Treatment Quintiles
Post 1 × Treatment Quintiles
Post 2 × Treatment Quintiles
Pre 1 × Passive Res. IO
Post 1 × Passive Res. IO
Post 2 × Passive Res. IO
Pre 1 × Passive Res. IO Q.
Post 1 × Passive Res. IO Q.
Post 2 × Passive Res. IO Q.
Pre 1 × Vanguard IO Q.
Post 1 × Vanguard IO Q.
Post 2 × Vanguard IO Q.

(2)

(3)

(4)

0.0057
(1.47)
-0.0164***
(-3.76)
-0.0259***
(-4.72)

-0.0009
(-0.18)
-0.0194***
(-3.48)
-0.0343***
(-5.40)

0.0019
(0.39)
-0.0193***
(-3.60)
-0.0331***
(-5.37)

0.2045*
(1.80)
-0.2170*
(-1.72)
0.0323
(0.19)

(5)
-0.9166
(-0.07)
-31.0396**
(-2.05)
-30.6799*
(-1.90)

(6)

0.0035
(1.04)
-0.0184***
(-4.64)
-0.0280***
(-5.86)
0.2702***
(2.62)
-0.3761***
(-3.20)
-0.1849
(-1.33)
0.0087*
(1.94)
-0.0015
(-0.33)
0.0133**
(2.35)

0.0056
(1.37)
-0.0037
(-0.86)
0.0093*
(1.76)
0.0137**
(2.50)
0.0015
(0.25)
0.0190***
(2.77)

IA.17

Electronic copy available at: https://ssrn.com/abstract=2641078

0.0099*
(1.86)
0.0013
(0.23)
0.0178***
(2.74)
Controls, controls × period indicators
Stock & Period
17,172
17,172
0.32
0.32

Pre 1 × Top 3 ETF IO Q.
Post 1 × Top 3 ETF IO Q.
Post 2 × Top 3 ETF IO Q.
Unreported
Fixed effects
Observations
Adjusted R2

17,172
0.31

17,172
0.32

17,172
0.31

17,172
0.32

Panel B: Tests on expanded sample used in Table 4, treatment variables in quintiles
Sample

OEF only

Treatment variable

IO BR+BGI

DHERF
ΔSharesHeld

Dependent variable
Pre 1 × Treatment Quintiles
Post 1 × Treatment Quintiles
Post 2 × Treatment Quintiles
Pre 1 × Passive Res. IO Q.
Post 1 × Passive Res. IO Q.
Post 2 × Passive Res. IO Q.
Pre 1 × Vanguard IO Q.
Post 1 × Vanguard IO Q.
Post 2 × Vanguard IO Q.

(1)
0.0041
(1.36)
-0.0211***
(-9.13)
-0.0183***
(-7.24)

(2)
0.0043
(1.44)
-0.0220***
(-8.37)
-0.0209***
(-6.97)
-0.0003
(-0.07)
0.0012
(0.62)
0.0037
(1.61)

(3)
0.0020
(0.65)
-0.0194***
(-6.64)
-0.0184***
(-5.57)

(4)
0.0021
(0.80)
-0.0209***
(-7.86)
-0.0184***
(-6.10)

0.0025
(0.94)
-0.0021
(-0.88)
0.0002
(0.06)

Pre 1 × Top 3 ETF IO Q.

0.0027
(0.91)
-0.0002
(-0.11)
0.0002
(0.09)
Controls, controls × period indicators

Post 1 × Top 3 ETF IO Q.
Post 2 × Top 3 ETF IO Q.
Unreported

IA.18

Electronic copy available at: https://ssrn.com/abstract=2641078

(5)
0.0027
(1.18)
-0.0203***
(-8.93)
-0.0173***
(-6.88)

(6)
0.0025
(0.56)
-0.0219***
(-8.07)
-0.0206***
(-6.70)
0.0004
(0.08)
0.0023
(1.07)
0.0045*
(1.93)

Fixed effects
Observations
Adjusted R2

4,156,602
0.05

4,156,602
0.05

4,156,602
0.05

Fund, Stock, Period
4,156,602
0.05

4,156,602
0.05

4,156,602
0.05

Panel C: Tests on expanded sample used in Table 4, treatment variables in raw form
Sample

OEF only

Treatment variable

IO BR+BGI
ΔSharesHeld

Dependent variable
Pre 1 × Treatment
Post 1 × Treatment
Post 2 × Treatment

(1)
0.3849*
(1.93)
-1.4276***
(-7.56)
-1.0985***
(-5.43)

Pre 1 × Passive Res. IO Q.
Post 1 × Passive Res. IO Q.
Post 2 × Passive Res. IO Q.

(2)
0.4283*
(1.77)
-1.3682***
(-6.46)
-1.1228***
(-4.83)
-0.0009
(-0.19)
-0.0012
(-0.59)
0.0005
(0.22)

Pre 1 × Vanguard IO Q.

(3)
0.2967
(1.31)
-1.1216***
(-4.89)
-0.8677***
(-3.51)

(4)
0.2858
(1.37)
-1.2822***
(-6.05)
-0.9478***
(-4.14)

(5)
2.5008
(0.33)
-36.9451***
(-3.55)
-27.8590***
(-2.86)

(6)
0.6947
(0.09)
-29.2605***
(-2.85)
-23.6080**
(-2.39)
0.0015
(0.38)
-0.0065***
(-3.41)
-0.0039*
(-1.91)

4,156,602
0.05

4,156,602
0.05

0.0015
(0.50)
-0.0051**
(-2.24)
-0.0039
(-1.56)

Post 1 × Vanguard IO Q.
Post 2 × Vanguard IO Q.
Pre 1 × Top 3 ETF IO Q.
Post 1 × Top 3 ETF IO Q.
Post 2 × Top 3 ETF IO Q.
Unreported
Fixed effects
Observations
Adjusted R2

DHERF

4,156,602
0.05

4,156,602
0.05

0.0019
(0.59)
-0.0029
(-1.44)
-0.0030
(-1.36)
Controls, controls × period indicators
Fund, Stock, Period
4,156,602
4,156,602
0.05
0.05

IA.19

Electronic copy available at: https://ssrn.com/abstract=2641078

Panel D: Table 4, with additional controls for passive residual ownership
Sample

OEF only

Treatment variable

Pre 1 × Treatment Q. × FCORR Residual
Post 1 × Treatment Q.× FCORR Residual
Post 2 × Treatment Q. × FCORR Residual
Pre 1 × Treatment Q. × FCORR BR / BGI
Post 1 × Treatment Q. × FCORR BR / BGI
Post 2 × Treatment Q.× FCORR BR / BGI

ΔSharesHeld
(1)
-0.0031
(-0.58)
-0.0184***
(-3.29)
-0.0097*
(-1.84)
0.0039
(0.81)
-0.0090*
(-1.78)
-0.0056
(-1.13)

Pre 1 × Treatment Q. × EXWEIGHT
Post 1 × Treatment Q.× EXWEIGHT
Post 2 × Treatment Q. × EXWEIGHT
Pre 1 × Treatment Q.× CONC
Post 1 × Treatment Q. × CONC
Post 2 × Treatment Q.× CONC
Pre 1 × Treatment Q. × ILLIQ
Post 1 × Treatment Q. × ILLIQ
Post 2 × Treatment Q. × ILLIQ
Unreported
Fixed effects
Observations
Adjusted R2

DHERF

IO BR+BGI

Dependent variable

2,291,487
0.04

(2)

(3)

(4)
-0.0018
(-0.33)
-0.0196***
(-3.53)
-0.0168***
(-3.09)
0.0035
(0.71)
-0.0098*
(-1.92)
-0.0092*
(-1.75)
-0.0070*
-0.0026
(-1.68)
(-0.48)
-0.0238***
-0.0336***
(-5.54)
(-6.05)
-0.0107**
-0.0256***
(-2.41)
(-4.47)
0.0054
0.0075
(1.27)
(1.30)
-0.0033
-0.0063
(-0.75)
(-1.04)
-0.0152***
-0.0179***
(-3.35)
(-2.80)
-0.0069**
-0.0078
(-1.98)
(-1.47)
-0.0019
-0.0029
(-0.51)
(-0.53)
0.0092**
-0.0030
(2.46)
(-0.52)
Controls (inc. passive residual IO), simple and triple interaction terms
Fund, Stock, Period
3,101,371
4,155,218
2,029,093
0.07
0.05
0.07

IA.20

Electronic copy available at: https://ssrn.com/abstract=2641078

(5)
-0.0135***
(-2.59)
-0.0199***
(-3.68)
-0.0211***
(-3.88)
0.0036
(0.74)
-0.0084*
(-1.68)
-0.0056
(-1.07)
-0.0024
(-0.43)
-0.0355***
(-6.32)
-0.0318***
(-5.52)
0.0109*
(1.92)
-0.0068
(-1.14)
-0.0160**
(-2.55)
-0.0055
(-1.01)
-0.0054
(-0.98)
-0.0028
(-0.49)

2,029,093
0.07

Panel E: Additional placebo test omitting the treatment variable
Treatment variable

IO BR+BGI
ΔSharesHeld

Dependent variable

Post x Treatment Q.
Post x Residual Passive IO Q.

(1)
-0.0178***
(-4.99)

(2)

-0.0060
(-1.62)

ΔSharesHeld
(3)
-0.0218***
(-5.53)
0.0067
(1.62)

Pre1 x Treatment Q.

0.0051
(1.22)
-0.0187***
(-4.10)
-0.0124**
(-2.45)

Post1 x Treatment Q.
Post2 x Treatment Q.
Pre1 x Residual Passive IO Q.
Post1 x Residual Passive IO Q.
Post1 x Residual Passive IO Q.
Unreported
Fixed effects
Observations
Adjusted R2

(4)

Controls, controls × period indicators
Stock & Period
22,655
22,655
22,655
0.23
0.23
0.23

(5)

(6)

-0.0010
(-0.22)
-0.0176***
(-3.47)
-0.0279***
(-4.75)
0.0094**
0.0101*
(1.99)
(1.89)
-0.0122**
-0.0019
(-2.53)
(-0.34)
0.0092*
0.0255***
(1.68)
(3.96)
Controls, controls × period indicators
Stock & period
22,655
22,655
22,655
0.23
0.23
0.23

IA.21

Electronic copy available at: https://ssrn.com/abstract=2641078

Table IA.6: Portfolio rebalancing by residual funds – Placebo tests with alternative event dates
This table presents additional robustness tests on the rebalancing of residual funds. The specifications are as in Table 2, Columns 4 or 7 for both versions of the treatment variable
but the actual event period of June – December 2009 has been re-defined to the placebo period June – December 2008 in Columns 1 to 4 or to the placebo period June – December
2007 in columns 5 to 8. All other specifications are unchanged.
Placebo event period
Treatment variable
Dependent variable
Pre 1 × Treatment Quintiles
Post 1 × Treatment Quintiles
Post 2 × Treatment Quintiles
Unreported
Fixed effects
Observations
Adjusted R2

June 2008
IO BR+BGI
ΔSharesHeld
(1)
0.0070
(1.55)
0.0010
(0.22)
0.0016
(0.37)

22,095
0.15

June 2007
DHERF

% NetBuy
ΔSharesHeld
(2)
(3)
0.0060*
0.0050
(1.73)
(1.25)
0.0129***
-0.0002
(3.80)
(-0.04)
-0.0003
-0.0016
(-0.07)
(-0.40)
Controls × period indicators
Stock & period
22,095
22,095
0.27
0.15

IO BR+BGI

% NetBuy
(4)
0.0070**
(2.19)
0.0137***
(4.32)
-0.0019
(-0.57)

ΔSharesHeld
(5)
0.0000*
(1.67)
0.0000
(0.46)
0.0000
(0.98)

22,095
0.28

20,692
0.18

IA.22

Electronic copy available at: https://ssrn.com/abstract=2641078

DHERF

% NetBuy
ΔSharesHeld
(6)
(7)
0.0056
0.0000*
(1.49)
(1.74)
-0.0045
0.0000
(-1.11)
(0.67)
0.0047
0.0000
(1.01)
(1.10)
Controls × period indicators
Stock & period
20,692
20,692
0.19
0.18

% NetBuy
(8)
0.0055
(1.48)
-0.0040
(-1.03)
-0.0056
(-1.16)

20,692
0.19

Table IA.7: Stock market effects around key merger event dates – Robustness tests
This table presents robustness tests to the results presented in Table 6. Panels A and B present multi-variate regression on the cross-section of daily abnormal returns during the event
window. Panels C and D present the same panel regressions as in Table 6 but for the merger announcement date and both versions of the treatment variable. Panels E and F present
panel regressions around the antitrust approval date but uses raw values of the treatment variables and alternative control variables for residual institutional ownership. Panel G
repeats Table 6, Panel C for the sample of overlapping stocks. Panels H and I present placebo tests that repeat the specifications of Table 6, Panel C but for alternative dates in the
merger process for both treatment variables. These placebo event dates include the announcement that BGI is for sale on March 16, 2009, the announcement that CVC agreed to buy
the iShares business on April 9, 2009 subject to a Go-shop provision, the expiration of the Go-shop provision on June 18, 2009, and the deal completion announcement on December
1, 2009. Panels J and K repeat Table 6, Panels D and E for the sample of overlapping stocks. Panels L and M present liquidity tests with an additional liquidity measure
𝐿𝑜𝑔 𝑇𝑢𝑟𝑛𝑜𝑣𝑒𝑟𝑠𝑡 defined as the natural logarithm of daily shares traded divided by shares outstanding for the full sample (Panel L) or the sample of overlapping stocks (Panel M).
All other specifications are unchanged.

Panel A: Cross-sectional regressions, treatment variable IO BR+BGI Quintiles
Sample
Dep. variable: Daily abnormal returns
IO BR+BGI Quintiles
Passive Residual IO Quintiles
Δ IO BlackRock
Log MCAP
Pastreturn
Log BTM
Dividend Yield
ROE
Leverage
Cash
Observations
Adjusted R2

Merger Announcement [0, 1]

Antitrust Approval [0, 1]

WM-adj.

LM-adj.

DGTW-adj.

WM-adj.

LM-adj.

DGTW-adj.

(1)
-0.0790***
(-3.99)
-0.0033
(-0.10)
2.5929
(0.88)
-0.0854***
(-2.70)
-0.2431***
(-2.81)
-0.1107
(-1.32)
-0.0042
(-0.38)
-0.0040***
(-7.06)
0.0537
(0.19)
0.3351**
(2.11)
11,233
0.01

(2)
-0.0334
(-1.14)
-0.0441**
(-2.39)
3.4007
(1.14)
-0.0692***
(-2.72)
-0.1583
(-1.17)
-0.1353**
(-2.17)
-0.0039
(-0.43)
-0.0037***
(-5.24)
0.0572
(0.21)
0.3299***
(2.79)
11,233
0.01

(3)
-0.0377
(-1.18)
-0.0639***
(-3.35)
1.6956
(0.44)
-0.0015
(-0.07)
-0.1734
(-0.96)
-0.1733***
(-3.46)
-0.0036
(-0.27)
-0.0044***
(-3.56)
-0.0253
(-0.10)
0.3292***
(3.01)
10,682
0.01

(4)
-0.3658*
(-1.80)
-0.0342
(-0.30)
-23.0925***
(-2.89)
0.0441
(0.72)
-0.6100***
(-3.02)
-0.0026
(-0.01)
0.0012
(0.04)
0.0061***
(6.12)
-0.6479**
(-2.20)
0.5184*
(1.74)
10,194
0.06

(5)
-0.0985***
(-2.85)
-0.0676**
(-2.45)
-15.2909***
(-7.07)
-0.0242
(-1.21)
-0.3821***
(-8.42)
-0.1372
(-1.66)
0.0138
(1.36)
0.0060***
(7.60)
-0.6505***
(-2.76)
0.2362
(1.51)
10,194
0.02

(6)
-0.0563**
(-2.28)
-0.0256
(-1.34)
-8.6249***
(-3.09)
-0.0342**
(-2.22)
-0.3288***
(-6.62)
0.0313
(0.80)
0.0109
(1.14)
0.0047***
(6.04)
-0.5180**
(-2.52)
0.0776
(0.39)
10,028
0.01

IA.23

Electronic copy available at: https://ssrn.com/abstract=2641078

Panel B: Cross-sectional regressions, treatment variable DHERF Quintiles
Sample
Dep. variable: Daily abnormal returns
DHERF Quintiles
Passive Residual IO Quintiles
Change IO BlackRock
Log MCAP
Pastreturn
Log BTM
Dividend Yield
ROE
Leverage
Cash
Observations
Adjusted R2

Merger Announcement [0, 1]

Antitrust Approval [0, 1]

WM-adj.

LM-adj.

DGTW-adj.

WM-adj.

LM-adj.

DGTW-adj.

(1)
-0.0240
(-0.70)
-0.0452
(-1.43)
3.2735
(1.15)
-0.0847***
(-2.71)
-0.2518***
(-3.06)
-0.1019
(-1.18)
-0.0041
(-0.36)
-0.0040***
(-6.87)
0.0780
(0.28)
0.3366**
(2.07)
11,233
0.01

(2)
-0.0107
(-0.29)
-0.0613**
(-2.61)
3.6852
(1.24)
-0.0689***
(-2.93)
-0.1620
(-1.21)
-0.1317**
(-2.09)
-0.0039
(-0.43)
-0.0037***
(-5.18)
0.0673
(0.25)
0.3305***
(2.73)
11,233
0.01

(3)
-0.0331
(-0.70)
-0.0730**
(-2.32)
1.7911
(0.47)
-0.0001
(-0.01)
-0.1763
(-0.98)
-0.1925***
(-4.18)
-0.0045
(-0.35)
-0.0052***
(-5.44)
-0.0126
(-0.05)
0.2682**
(2.24)
10,682
0.01

(4)
-0.3289*
(-1.90)
-0.0525
(-0.53)
-21.3997***
(-3.23)
0.0558
(0.88)
-0.6268***
(-2.83)
0.0044
(0.02)
0.0007
(0.02)
0.0061***
(6.90)
-0.5996**
(-2.05)
0.4980
(1.64)
10,194
0.06

(5)
-0.0801***
(-2.71)
-0.0792***
(-3.20)
-14.7803***
(-7.28)
-0.0214
(-1.15)
-0.3870***
(-8.60)
-0.1344
(-1.62)
0.0137
(1.33)
0.0061***
(7.88)
-0.6350***
(-2.75)
0.2311
(1.47)
10,194
0.02

(6)
-0.0328
(-1.58)
-0.0445**
(-2.50)
-8.2496***
(-2.97)
-0.0328**
(-2.29)
-0.3308***
(-6.75)
0.0356
(0.91)
0.0104
(1.09)
0.0047***
(5.95)
-0.5006**
(-2.48)
0.0880
(0.45)
10,028
0.01

IA.24

Electronic copy available at: https://ssrn.com/abstract=2641078

Panel C: Panel regressions – Merger announcement event, treatment variable IO BR+BGI
Sample
Dependent variable: Daily abnormal returns
IO BR+BGI × [-5, -1]
IO BR+BGI × [0, 1]
IO BR+BGI × [2, 6]
IO BR+BGI × [7, 20]

Merger Announcement [-20, 20]
WM-adj.

LM-adj.

DGTW-adj.

WM-adj.

LM-adj.

DGTW-adj.

(1)
-7.7944
(-0.96)
-14.3574**
(-2.11)
-8.0255
(-0.75)
-9.3125
(-1.09)

(2)
-6.8561**
(-2.21)
-8.0375
(-1.03)
-2.8287
(-0.62)
-3.6286
(-0.78)

(3)
-7.5376**
(-2.32)
-7.6789
(-1.11)
-2.4215
(-0.49)
-3.6249
(-0.73)

(4)

(5)

(6)

IO BR+BGI Quintiles × [-5, -1]
IO BR+BGI Quintiles × [0, 1]
IO BR+BGI Quintiles × [2, 6]
IO BR+BGI Quintiles × [7, 20]
Passive Residual IO Quintiles × [-5, -1]
Passive Residual IO Quintiles × [0, 1]
Passive Residual IO Quintiles × [2, 6]
Passive Residual IO Quintiles × [7, 20]
Unreported
Fixed Effects
Observations
Adjusted R2

0.1003
0.0059
-0.0085
(0.54)
(0.07)
(-0.13)
0.0374
-0.0602
-0.0881
(0.27)
(-0.85)
(-1.58)
-0.0225
-0.1132
-0.1165*
(-0.13)
(-1.41)
(-1.74)
-0.0409
-0.0741
-0.0605
(-0.28)
(-0.99)
(-0.96)
Controls, controls × event indicators, country-specific turn
of month & turn of week effects
Stock & trading day
229,108
229,108
218,519
0.01
0.01
0.01

-0.0765
-0.0623
-0.0838
(-0.57)
(-1.27)
(-1.66)
-0.1599
-0.0658
-0.0717
(-1.50)
(-1.19)
(-1.07)
-0.1352
-0.0535
-0.0410
(-0.76)
(-0.70)
(-0.51)
-0.1304
-0.0355
-0.0284
(-0.92)
(-0.46)
(-0.40)
0.0959
-0.0016
-0.0050
(0.55)
(-0.02)
(-0.09)
0.0444
-0.0745
-0.0952**
(0.28)
(-1.55)
(-2.15)
0.0165
-0.0949
-0.1044**
(0.10)
(-1.65)
(-2.05)
-0.0160
-0.0762
-0.0682
(-0.12)
(-1.24)
(-1.21)
Controls, controls × event indicators, country-specific
turn of month & turn of week effects
Stock & trading day
229,108
229,108
218,519
0.01
0.01
0.01

IA.25

Electronic copy available at: https://ssrn.com/abstract=2641078

Panel D: Panel regressions – Merger announcement event, treatment variable DHERF
Sample
Dependent variable: Daily abnormal returns
DHERF × [-5, -1]
DHERF × [0, 1]
DHERF × [2, 6]
DHERF × [7, 20]

Merger Announcement [-20, 20]
WM-adj.

LM-adj.

DGTW-adj.

WM-adj.

LM-adj.

DGTW-adj.

(1)
-66.1365
(-0.49)
-218.6623**
(-2.58)
-87.3253
(-0.47)
-128.4632
(-1.01)

(2)
-51.6852
(-1.15)
-127.0733
(-1.36)
9.5370
(0.23)
-28.4091
(-0.64)

(3)
-59.6414
(-1.35)
-119.0653**
(-2.48)
-9.5064
(-0.22)
-41.8519
(-0.72)

(4)

(5)

(6)

DHERF Quintiles × [-5, -1]
DHERF Quintiles × [0, 1]
DHERF Quintiles × [2, 6]
DHERF Quintiles × [7, 20]
Passive Residual IO Quintiles × [-5, -1]
Passive Residual IO Quintiles × [0, 1]
Passive Residual IO Quintiles × [2, 6]
Passive Residual IO Quintiles × [7, 20]
Unreported
Fixed Effects
Observations
Adjusted R2

0.0442
-0.0442
-0.0642
(0.19)
(-0.48)
(-0.75)
-0.0564
-0.1123
-0.1390
(-0.30)
(-1.32)
(-1.51)
-0.0783
-0.1368
-0.1353
(-0.38)
(-1.17)
(-1.31)
-0.1031
-0.1004
-0.0859
(-0.54)
(-1.05)
(-1.07)
Controls, controls × event indicators, country-specific turn
of month & turn of week effects
Stock & trading day
229,108
229,108
218,519
0.01
0.01
0.01

-0.0565
-0.0550
-0.0745
(-0.47)
(-1.15)
(-1.53)
-0.1125
-0.0546
-0.0798
(-1.06)
(-1.11)
(-1.46)
-0.1443
-0.0507
-0.0501
(-0.89)
(-0.81)
(-0.73)
-0.1689
-0.0531
-0.0463
(-1.22)
(-0.77)
(-0.70)
0.0815
-0.0061
-0.0112
(0.47)
(-0.08)
(-0.18)
0.0100
-0.0820
-0.0938*
(0.07)
(-1.62)
(-1.84)
0.0265
-0.0961
-0.0966
(0.18)
(-1.44)
(-1.61)
0.0172
-0.0615
-0.0536
(0.14)
(-0.98)
(-0.93)
Controls, controls × event indicators, country-specific
turn of month & turn of week effects
Stock & trading day
229,108
229,108
218,519
0.01
0.01
0.01

IA.26

Electronic copy available at: https://ssrn.com/abstract=2641078

Panel E: Panel regressions – Antitrust approval event, treatment variables IO BR+BGI in raw form and alternative controls for residual
institutional ownership
Sample
Dependent variable: Daily
abnormal returns
IO BR+BGI × [-5, -1]
IO BR+BGI × [0, 1]
IO BR+BGI × [2, 6]
IO BR+BGI × [7, 20]
Total Residual IO Q. × [-5, -1]
Total Residual IO Q. × [0, 1]
Total Residual IO Q. × [2, 6]
Total Residual IO Q. × [7, 20]

WM-adj.
(1)
3.4384
(0.48)
-12.5124*
(-2.01)
-7.9802
(-0.59)
-0.3054
(-0.05)
-0.0579
(-0.56)
-0.4092**
(-2.36)
-0.0488
(-0.41)
0.0021
(0.03)

LM-adj.
(2)
4.1328
(1.18)
-9.9593***
(-3.09)
-7.2258
(-1.10)
0.2651
(0.08)
-0.0393
(-0.96)
-0.1028***
(-3.54)
-0.0191
(-0.46)
-0.0377
(-1.41)

DGTW-adj.
(3)
3.4893
(1.09)
-6.1940**
(-2.55)
-7.0279
(-1.31)
0.4324
(0.16)
-0.0220
(-0.86)
-0.0421
(-1.59)
0.0086
(0.25)
-0.0316
(-1.33)

Passive Res. IO Q. × [-5, -1]

Antitrust Approval [-20, 20]
WM-adj.
LM-adj.
DGTW-adj.
(4)
(5)
(6)
0.7809
1.0797
2.0343
(0.11)
(0.32)
(0.75)
-25.5593*** -10.3170***
-7.0612***
(-3.01)
(-6.69)
(-4.34)
-3.8618
-5.6246
-5.4430*
(-0.40)
(-1.47)
(-1.76)
0.6842
-1.2805
-1.1440
(0.12)
(-0.52)
(-0.51)

-0.0022
(-0.02)
-0.1091
(-1.34)
-0.1146
(-0.73)
-0.0154
(-0.20)

Passive Res. IO Q. × [0, 1]
Passive Res. IO Q. × [2, 6]
Passive Res. IO Q.× [7, 20]

0.0201
(0.60)
-0.0794
(-1.17)
-0.0447
(-0.81)
-0.0061
(-0.19)

Active Res. IO Q.× [0, 1]
Active Res. IO Q. × [2, 6]
Active Res. IO Q.× [7, 20]

Fixed Effects
Observations
Adjusted R2

Controls, controls × event indicators,
country-specific turn of month & turn of
week effects
Stock & trading day
225,781
225,781
222,117
0.01
0.00
-0.00

LM-adj.
(8)
3.3415
(0.87)
-12.4593***
(-3.37)
-8.2835
(-1.25)
-0.3400
(-0.10)

DGTW-adj.
(9)
2.8076
(0.83)
-7.4061***
(-2.81)
-7.5310
(-1.42)
0.0032
(0.00)

0.0068
(0.26)
-0.0202
(-0.56)
-0.0203
(-0.50)
-0.0002
(-0.01)

Active Res. IO Q. × [-5, -1]

Unreported

WM-adj.
(7)
2.3013
(0.28)
-19.2591***
(-3.12)
-9.9267
(-0.62)
-0.4674
(-0.06)

Controls, controls × event indicators,
country-specific turn of month & turn of
week effects
Stock & trading day
225,781
225,781
222,117
0.01
0.00
-0.00

IA.27

Electronic copy available at: https://ssrn.com/abstract=2641078

-0.0444
-0.0296
-0.0100
(-0.48)
(-0.77)
(-0.37)
-0.3451*
-0.0648***
-0.0214
(-1.91)
(-2.71)
(-0.86)
-0.0126
0.0025
0.0235
(-0.14)
(0.06)
(0.68)
0.0068
-0.0324
-0.0291
(0.10)
(-1.33)
(-1.34)
Controls, controls × event indicators,
country-specific turn of month & turn of
week effects
Stock & trading day
225,781
225,781
222,117
0.01
0.00
-0.00

Panel F: Panel regressions – Antitrust approval event, treatment variables DHERF in raw form and alternative controls for residual institutional
ownership
Sample
Dependent Variable: Daily
abnormal returns
DHERF × [-5, -1]
DHERF × [0, 1]
DHERF × [2, 6]
DHERF × [7, 20]
Total Res. IO Q. × [-5, -1]
Total Res. IO Q.× [0, 1]
Total Res. IO Q. × [2, 6]
Total Res. IO Q.× [7, 20]

WM-adj.
(1)
28.8251
(0.19)
-291.1630**
(-2.13)
-159.0760
(-0.69)
-60.4472
(-0.56)
-0.0367
(-0.32)
-0.4687***
(-2.83)
-0.0899
(-0.51)
0.0058
(0.06)

LM-adj.
(2)
20.9373
(0.28)
-295.382***
(-5.49)
-157.5390
(-1.40)
-35.0982
(-0.70)
-0.0123
(-0.27)
-0.1439***
(-3.55)
-0.0550
(-1.43)
-0.0324
(-1.00)

DGTW-adj.
(3)
10.5184
(0.17)
-208.9424***
(-3.32)
-164.3328*
(-1.87)
-35.0258
(-0.75)
0.0016
(0.05)
-0.0654**
(-2.07)
-0.0254
(-1.14)
-0.0251
(-0.90)

Passive Res. IO Q. × [-5, -1]

Antitrust Approval [-20, 20]
WM-adj.
LM-adj.
DGTW-adj.
(4)
(5)
(6)
-32.2071
-45.8442
-25.5052
(-0.22)
(-0.55)
(-0.44)
-538.440***
-296.639***
-217.781***
(-3.83)
(-7.08)
(-4.29)
-82.8454
-119.8952*
-123.343***
(-0.51)
(-1.99)
(-3.25)
-43.5567
-68.1110*
-67.9212*
(-0.50)
(-1.86)
(-1.82)

0.0073
(0.07)
-0.2594***
(-3.23)
-0.1376
(-0.61)
-0.0054
(-0.05)

Passive Res. IO Q.× [0, 1]
Passive Res. IO Q. × [2, 6]
Passive Res. IO Q.× [7, 20]

0.0333
(0.76)
-0.1323*
(-1.84)
-0.0782
(-1.12)
-0.0096
(-0.23)

Active Res. IO Q. × [0, 1]
Active Res. IO Q. × [2, 6]
Active Res. IO Q. × [7, 20]

Fixed Effects
Observations
Adjusted R2

Controls, controls × event indicators,
country-specific turn of month & turn of
week effects
Stock & trading day
225,781
225,781
222,117
0.01
0.00
-0.00

LM-adj.
(8)
17.9104
(0.19)
-375.881***
(-5.20)
-204.5217
(-1.48)
-45.1353
(-0.69)

DGTW-adj.
(9)
6.9007
(0.09)
-250.708***
(-3.46)
-197.9625*
(-1.85)
-40.2124
(-0.68)

0.0256
(0.70)
-0.0550
(-1.38)
-0.0521
(-0.90)
-0.0026
(-0.08)

Active Res. IO Q. × [-5, -1]

Unreported

WM-adj.
(7)
15.3257
(0.08)
-465.897***
(-3.15)
-229.8749
(-0.69)
-63.3842
(-0.43)

Controls, controls × event indicators,
country-specific turn of month & turn of
week effects
Stock & trading day
225,781
225,781
222,117
0.01
0.00
-0.00

IA.28

Electronic copy available at: https://ssrn.com/abstract=2641078

-0.0335
-0.0130
0.0047
(-0.33)
(-0.32)
(0.17)
-0.4126**
-0.1025***
-0.0418
(-2.27)
(-3.26)
(-1.45)
-0.0498
-0.0274
-0.0029
(-0.37)
(-0.77)
(-0.14)
0.0093
-0.0307
-0.0258
(0.12)
(-1.13)
(-1.11)
Controls, controls × event indicators,
country-specific turn of month & turn of
week effects
Stock & trading day
225,781
225,781
222,117
0.01
0.00
-0.00

Panel G: Table 6, Panel C on the sample of overlapping stocks only
Sample

Antitrust Approval [-20, 20]

Treatment variable
Dependent variable: Daily abnormal returns
Treatment Quintiles × [-5, -1]
Treatment Quintiles × [0, 1]
Treatment Quintiles × [2, 6]
Treatment Quintiles × [7, 20]
Passive Residual IO Quintiles × [-5, -1]
Passive Residual IO Quintiles × [0, 1]
Passive Residual IO Quintiles × [2, 6]
Passive Residual IO Quintiles × [7, 20]
Unreported
Fixed Effects
Observations
Adjusted R2

IO BR+BGI
WM-adj.

LM-adj.

DHERF
DGTW-adj.

(1)
(2)
(3)
0.0129
0.0190
0.0365
(0.13)
(0.41)
(0.88)
-0.3461**
-0.1288***
-0.0977***
(-2.65)
(-4.89)
(-3.69)
-0.0429
-0.0697
-0.0674
(-0.32)
(-1.30)
(-1.44)
0.0187
-0.0080
-0.0072
(0.25)
(-0.23)
(-0.22)
0.0077
0.0243
0.0028
(0.07)
(0.79)
(0.12)
-0.0840
-0.0966
-0.0423
(-0.80)
(-1.61)
(-1.02)
-0.1063
-0.0363
-0.0176
(-0.71)
(-0.67)
(-0.45)
-0.0180
-0.0051
-0.0046
(-0.25)
(-0.15)
(-0.15)
Controls, controls × event indicators, country-specific turn
of month & turn of week effects
Stock & trading day
172,435
172,435
170,156
0.01
0.01
0.00

WM-adj.

LM-adj.

DGTW-adj.

(4)
(5)
(6)
-0.0171
-0.0097
0.0073
(-0.21)
(-0.25)
(0.21)
-0.2815**
-0.1016***
-0.0628***
(-2.67)
(-6.00)
(-3.37)
-0.0354
-0.0518
-0.0472*
(-0.33)
(-1.61)
(-1.75)
0.0191
-0.0077
-0.0059
(0.31)
(-0.33)
(-0.25)
0.0292
0.0438
0.0204
(0.30)
(1.21)
(0.67)
-0.0864
-0.1000
-0.0558
(-0.86)
(-1.39)
(-1.12)
-0.1066
-0.0414
-0.0247
(-0.68)
(-0.61)
(-0.46)
-0.0208
-0.0043
-0.0047
(-0.29)
(-0.13)
(-0.16)
Controls, controls × event indicators, country-specific
turn of month & turn of week effects
Stock & trading day
172,435
172,435
170,156
0.01
0.01
0.00

IA.29

Electronic copy available at: https://ssrn.com/abstract=2641078

Panel H: Placebo tests, treatment variable IO BR+BGI
Sample
Dependent variable: Daily abnormal returns
Treatment Quintiles × [-5, -1]
Treatment Quintiles × [0, 1]
Treatment Quintiles × [2, 6]
Treatment Quintiles × [7, 20]
Passive Residual IO Quintiles × [-5, -1]
Passive Residual IO Quintiles × [0, 1]
Passive Residual IO Quintiles × [2, 6]
Passive Residual IO Quintiles × [7, 20]
Unreported
Fixed Effects
Observations
Adjusted R2

BGI For Sale [-20, 20]
WM-adj.

LM-adj.

CVC [-20, 20]
DGTW-adj.

(1)
(2)
(3)
0.3797
0.1259
0.0052
(1.23)
(1.14)
(0.05)
-0.0056
0.0178
-0.0165
(-0.02)
(0.10)
(-0.10)
0.1256
0.1219
0.0471
(0.46)
(0.86)
(0.49)
0.1864
0.1054
0.0335
(1.15)
(1.36)
(0.48)
0.5508*
0.3923**
0.3175**
(1.91)
(2.67)
(2.50)
0.3112
0.2635*
0.2009
(0.54)
(1.72)
(1.57)
0.1077
0.2172
0.2003*
(0.28)
(1.68)
(2.00)
0.2331
0.2017
0.1715
(1.14)
(1.66)
(1.58)
Controls, controls × event indicators, country-specific turn
of month & turn of week effects
Stock & trading day
225,322
225,322
216,099
0.02
0.01
0.01

WM-adj.

LM-adj.

DGTW-adj.

(4)
(5)
(6)
-0.0060
-0.0058
-0.0031
(-0.03)
(-0.05)
(-0.03)
0.0556
0.0706
-0.0427
(0.28)
(0.60)
(-0.87)
-0.0335
-0.0311
-0.0481
(-0.17)
(-0.32)
(-0.62)
-0.0975
-0.0279
-0.0195
(-0.48)
(-0.32)
(-0.28)
-0.0200
0.0579
0.0814
(-0.08)
(0.29)
(0.44)
0.3609
0.2890
0.2360
(0.86)
(1.20)
(1.28)
-0.0472
-0.0064
0.0257
(-0.15)
(-0.04)
(0.18)
-0.1180
-0.0505
-0.0384
(-0.60)
(-0.48)
(-0.44)
Controls, controls × event indicators, country-specific
turn of month & turn of week effects
Stock & trading day
222,698
222,698
213,442
0.02
0.02
0.02

IA.30

Electronic copy available at: https://ssrn.com/abstract=2641078

Sample
Dependent variable: Daily abnormal returns
Treatment Quintiles × [-5, -1]
Treatment Quintiles × [0, 1]
Treatment Quintiles × [2, 6]
Treatment Quintiles × [7, 20]
Passive Residual IO Quintiles × [-5, -1]
Passive Residual IO Quintiles × [0, 1]
Passive Residual IO Quintiles × [2, 6]
Passive Residual IO Quintiles × [7, 20]
Unreported
Fixed Effects
Observations
Adjusted R2

Expiration Go Shop [-20, 20]
WM-adj.

LM-adj.

DGTW-adj.

(1)
(2)
(3)
-0.2203*
-0.0505
-0.0255
(-1.83)
(-0.75)
(-0.33)
0.2526***
0.0582
0.0307
(3.17)
(0.68)
(0.37)
0.0270
0.1152
0.1276
(0.11)
(0.78)
(0.99)
0.0283
0.0025
-0.0013
(0.21)
(0.04)
(-0.02)
0.0283
-0.0811*
-0.0852*
(0.19)
(-1.72)
(-1.94)
-0.1763*
-0.0720
-0.0962*
(-1.89)
(-1.19)
(-1.93)
-0.1043
-0.1012
-0.1098
(-0.54)
(-1.49)
(-1.57)
0.0014
0.0083
0.0208
(0.01)
(0.15)
(0.38)
Controls, controls × event indicators, country-specific turn
of month & turn of week effects
Stock & trading day
229,179
229,179
218,346
0.01
0.01
0.00

Deal Completion [-20, 20]
WM-adj.

LM-adj.

DGTW-adj.

(4)
(5)
(6)
-0.2641**
-0.0549
-0.0536
(-2.63)
(-0.72)
(-0.83)
0.0967
0.0857
0.0897
(1.19)
(1.46)
(1.67)
-0.2365
-0.0345
-0.0394
(-1.32)
(-0.41)
(-0.54)
-0.0957
-0.0447
-0.0452
(-1.22)
(-0.77)
(-0.84)
0.0491
-0.0689**
-0.0662***
(0.30)
(-2.20)
(-2.75)
-0.1382*
0.0492*
0.0255
(-1.90)
(2.00)
(1.33)
0.2026**
0.0651
0.0484
(2.24)
(1.38)
(1.29)
0.0863
0.0695**
0.0511**
(1.12)
(2.33)
(2.18)
Controls, controls × event indicators, country-specific
turn of month & turn of week effects
Stock & trading day
227,472
227,472
221,504
0.02
0.01
0.01

IA.31

Electronic copy available at: https://ssrn.com/abstract=2641078

Panel I: Placebo tests, treatment variable DHERF Quintiles
Sample
Dependent variable: Daily abnormal returns
DHERF Quintiles × [-5, -1]
DHERF Quintiles × [0, 1]
DHERF Quintiles × [2, 6]
DHERF Quintiles × [7, 20]
Passive Residual IO Quintiles × [-5, -1]
Passive Residual IO Quintiles × [0, 1]
Passive Residual IO Quintiles × [2, 6]
Passive Residual IO Quintiles × [7, 20]
Unreported
Fixed Effects
Observations
Adjusted R2

BGI For Sale [-20, 20]
WM-adj.

LM-adj.

CVC [-20, 20]
DGTW-adj.

(1)
(2)
(3)
0.3180
0.0476
-0.0713
(1.15)
(0.62)
(-0.93)
-0.0006
-0.0196
-0.0522
(-0.00)
(-0.11)
(-0.30)
0.1084
0.0864
0.0106
(0.40)
(0.60)
(0.10)
0.1654
0.0788
0.0129
(1.02)
(1.00)
(0.18)
0.5905*
0.4507**
0.3775**
(1.93)
(2.62)
(2.46)
0.3073
0.2923*
0.2282*
(0.53)
(1.87)
(1.92)
0.1184
0.2421*
0.2282**
(0.31)
(1.88)
(2.40)
0.2456
0.2202*
0.1872*
(1.23)
(1.78)
(1.69)
Controls, controls × event indicators, country-specific turn
of month & turn of week effects
Stock & trading day
225,322
225,322
216,099
0.02
0.01
0.01

WM-adj.

LM-adj.

DGTW-adj.

(4)
(5)
(6)
0.0372
0.0360
0.0529
(0.16)
(0.27)
(0.51)
0.0246
0.0723
-0.0479
(0.12)
(0.73)
(-0.79)
-0.0133
-0.0171
-0.0276
(-0.07)
(-0.18)
(-0.35)
-0.0940
-0.0256
-0.0079
(-0.49)
(-0.29)
(-0.11)
-0.0534
0.0255
0.0376
(-0.22)
(0.13)
(0.20)
0.3846
0.2865
0.2379
(0.93)
(1.12)
(1.15)
-0.0622
-0.0166
0.0103
(-0.21)
(-0.10)
(0.07)
-0.1184
-0.0517
-0.0472
(-0.59)
(-0.47)
(-0.54)
Controls, controls × event indicators, country-specific
turn of month & turn of week effects
Stock & trading day
222,698
222,698
213,442
0.02
0.02
0.02

IA.32

Electronic copy available at: https://ssrn.com/abstract=2641078

Sample
Dependent variable: Daily abnormal returns
DHERF Quintiles × [-5, -1]
DHERF Quintiles × [0, 1]
DHERF Quintiles × [2, 6]
DHERF Quintiles × [7, 20]
Passive Residual IO Quintiles × [-5, -1]
Passive Residual IO Quintiles × [0, 1]
Passive Residual IO Quintiles × [2, 6]
Passive Residual IO Quintiles × [7, 20]
Unreported
Fixed Effects
Observations
Adjusted R2

Expiration Go Shop [-20, 20]
WM-adj.

LM-adj.

DGTW-adj.

(1)
(2)
(3)
-0.2044*
-0.0427
-0.0399
(-1.76)
(-0.71)
(-0.58)
0.1853**
0.0239
0.0026
(2.37)
(0.40)
(0.04)
-0.0405
0.0726
0.0833
(-0.17)
(0.54)
(0.70)
-0.0137
-0.0199
-0.0237
(-0.11)
(-0.34)
(-0.45)
0.0204
-0.0862
-0.0734
(0.14)
(-1.62)
(-1.43)
-0.1287
-0.0461
-0.0818
(-1.44)
(-0.59)
(-1.21)
-0.0515
-0.0700
-0.0765
(-0.28)
(-1.09)
(-1.15)
0.0339
0.0260
0.0386
(0.31)
(0.45)
(0.68)
Controls, controls × event indicators, country-specific turn
of month & turn of week effects
Stock & trading day
229,179
229,179
218,346
0.01
0.01
0.00

Deal Completion [-20, 20]
WM-adj.

LM-adj.

DGTW-adj.

(4)
(5)
(6)
-0.2137**
-0.0327
-0.0351
(-2.09)
(-0.56)
(-0.71)
0.0857
0.0824
0.0805
(1.22)
(1.48)
(1.55)
-0.1975
-0.0154
-0.0098
(-1.15)
(-0.18)
(-0.13)
-0.0724
-0.0338
-0.0326
(-0.97)
(-0.63)
(-0.65)
0.0149
-0.0853**
-0.0796***
(0.09)
(-2.24)
(-2.97)
-0.1324*
0.0496*
0.0300
(-1.72)
(1.94)
(1.42)
0.1778*
0.0510
0.0264
(2.02)
(1.14)
(0.79)
0.0701
0.0620*
0.0424*
(0.95)
(2.01)
(1.75)
Controls, controls × event indicators, country-specific
turn of month & turn of week effects
Stock & trading day
227,472
227,472
221,504
0.02
0.01
0.01

IA.33

Electronic copy available at: https://ssrn.com/abstract=2641078

Panel J: Table 6, Panel D on the sample of overlapping stocks only
Sample

BGI For
Sale

Treatment variable

Passive Res. IO Q. × [2, 60]
Unreported
Fixed effects
Observations
Adjusted R2

Antitrust
Approval

Deal
Completion

BGI For
Sale

Merger
Announcement

IO BR+BGI

Dependent variable
Treatment Q. × [2, 60]

Merger
Announcement

Antitrust
Approval

Deal
Completion

DHERF

Amihud

Amihud

(1)
(2)
(3)
(4)
0.0015*
0.0027***
0.0034***
0.0038***
(1.90)
(3.14)
(3.62)
(3.94)
0.0037***
0.0046***
0.0050***
-0.0365***
(4.25)
(5.07)
(5.38)
(5.39)
Controls, controls × event indicators, country-specific turn of month
& turn of week effects
Stock & trading day
466,933
471,090
469,985
466,043
0.37
0.35
0.35
0.34

(5)
(6)
(7)
(8)
0.0004
0.0016**
0.0020***
0.0024***
(0.61)
(2.26)
(2.64)
(3.21)
0.0043***
0.0051***
0.0057***
0.0058***
(4.50)
(5.21)
(5.69)
(5.58)
Controls, controls × event indicators, country-specific turn of month
& turn of week effects
Stock & trading day
466,933
471,090
469,985
466,043
0.33
0.35
0.35
0.34

Panel K: Table 6, Panel E on the sample of overlapping stocks only
Sample
Treatment variable
Dependent variable
Treatment Q. × [2, 60]
Passive Res. IO Q. × [2, 60]
Unreported
Fixed effects
Observations
Adjusted R2

BGI For
Sale

Merger
Announcement

Antitrust
Approval

Deal
Completion

BGI For
Sale

Merger
Announcement

IO BR+BGI

Antitrust
Approval

Deal
Completion

DHERF

Log TradingVolume

Log TradingVolume

(1)
(2)
(3)
(4)
0.0076
-0.0105
-0.0191*
-0.0365***
(1.04)
(-1.08)
(-1.80)
(-3.12)
-0.0405***
-0.0562***
-0.0689***
-0.0717***
(-5.02)
(-5.48)
(-6.37)
(-6.26)
Controls, controls × event indicators, country-specific turn of month
& turn of week effects
Stock & trading day
467,192
471,380
470,245
466,313
0.92
0.91
0.91
0.91

(5)
(6)
(7)
(8)
0.0093
-0.0159*
-0.0229***
-0.0401***
(1.47)
(-1.96)
(-2.63)
(-4.36)
-0.0428***
-0.0506***
-0.0635***
-0.0642***
(-5.25)
(-4.88)
(-5.73)
(-5.61)
Controls, controls × event indicators, country-specific turn of month
& turn of week effects
Stock & trading day
467,192
471,380
470,245
466,313
0.92
0.91
0.91
0.91

IA.34

Electronic copy available at: https://ssrn.com/abstract=2641078

Panel L: Stock liquidity measured by Log Turnover
Sample

BGI For
Sale

Treatment variable

Passive Res. IO Q. × [2, 60]
Unreported
Fixed effects
Observations
Adjusted R2

Antitrust
Approval

Deal
Completion

BGI For
Sale

Merger
Announcement

IO BR+BGI

Dependent variable
Treatment Q. × [2, 60]

Merger
Announcement

Antitrust
Approval

Deal
Completion

DHERF

Log Turnover

Log Turnover

(1)
(2)
(3)
(4)
-0.0068
-0.0252*
-0.0135
-0.0186
(-0.61)
(-1.83)
(-1.03)
(-1.49)
0.0111
-0.0188
-0.0325*
-0.0432***
(0.83)
(-1.23)
(-1.94)
(-2.93)
Controls, controls × event indicators, country-specific turn of month
& turn of week effects
Stock & trading day
609,958
619,152
617,440
615,049
0.71
0.69
0.70
0.69

(5)
(6)
(7)
(8)
-0.0097
-0.0282**
-0.0117
-0.0215*
(-0.86)
(-2.00)
(-0.87)
(-1.73)
0.0135
-0.0159
-0.0337*
-0.0405***
(0.95)
(-0.97)
(-1.90)
(-2.64)
Controls, controls × event indicators, country-specific turn of month
& turn of week effects
Stock & trading day
609,958
619,152
617,440
615,049
0.71
0.69
0.70
0.69

Panel M: Stock liquidity measured by Log Turnover on the sample of overlapping stocks only
Sample
Treatment variable
Dependent variable
Treatment Q. × [2, 60]
Passive Res. IO Q. × [2, 60]
Unreported
Fixed effects
Observations
Adjusted R2

BGI For
Sale

Merger
Announcement

Antitrust
Approval

Deal
Completion

BGI For
Sale

Merger
Announcement

IO BR+BGI

Antitrust
Approval

Deal
Completion

DHERF

Log Turnover

Log Turnover

(1)
(2)
(3)
(4)
0.0053
-0.0392***
-0.0344**
-0.0448***
(0.42)
(-2.79)
(-2.25)
(-3.03)
0.0098
-0.0358*
-0.0516**
-0.0625***
(0.60)
(-1.97)
(-2.46)
(-3.36)
Controls, controls × event indicators, country-specific turn of month
& turn of week effects
Stock & trading day
468,267
472,525
471,494
467,847
0.72
0.71
0.72
0.71

(5)
(6)
(7)
(8)
0.0125
-0.0376***
-0.0313**
-0.0485***
(1.28)
(-3.63)
(-2.45)
(-4.46)
0.0037
-0.0319*
-0.0495**
-0.0539***
(0.25)
(-1.90)
(-2.39)
(-3.16)
Controls, controls × event indicators, country-specific turn of month
& turn of week effects
Stock & trading day
468,267
472,525
471,494
467,847
0.72
0.71
0.72
0.71

IA.35

Electronic copy available at: https://ssrn.com/abstract=2641078

Table IA.8: The relationship between volatility and fragility
This table presents forecasting regressions at the stock-month level to examine the relationship between volatility, fragility, and
OEF ownership. The sample includes all stock-months that are affected by mergers between 2002 and 2013 and that we cover in
previous tests. The estimated regression is:
𝑉𝑜𝑙𝑎𝑖𝑙𝑖𝑡𝑦𝑠𝑡+1 = 𝛽1 √𝐹𝑟𝑎𝑔𝑖𝑙𝑖𝑡𝑦 (𝑂𝐸𝐹 𝑜𝑛𝑙𝑦)𝑠𝑡 + 𝛽2 √𝐹𝑟𝑎𝑔𝑖𝑙𝑖𝑡𝑦 (𝐴𝑙𝑙 𝑓𝑢𝑛𝑑𝑠)𝑠𝑡 + 𝛽3 𝑂𝐸𝐹 𝐼𝑂𝑠𝑡 + 𝛾 ′ 𝑋𝑠𝑡 + 𝛼𝑡 + 𝛼𝑠 + 𝜖𝑠𝑡+1 ,
where 𝑉𝑜𝑙𝑎𝑡𝑖𝑙𝑖𝑡𝑦𝑠𝑡 is monthly stock volatility measured from daily stock returns of stock s during month t. We present two
measures of monthly stock volatility: 𝑇𝑜𝑡𝑎𝑙𝑉𝑜𝑙𝑠𝑡 is the total stock volatility measures as the annualized standard deviation of daily
stock returns of stock s in month t, 𝐼𝑑𝑖𝑜𝑉𝑜𝑙𝑠𝑡 is the annualized standard deviation of the residuals of a first-stage regression of daily
stock returns of stock s in month t on domestic market, size, value, and momentum factors. The main explanatory variables include
the lags of √𝐹𝑟𝑎𝑔𝑖𝑙𝑖𝑡𝑦 (𝑂𝐸𝐹 𝑜𝑛𝑙𝑦)𝑠𝑡 and √𝐹𝑟𝑎𝑔𝑖𝑙𝑖𝑡𝑦 (𝐴𝑙𝑙 𝑓𝑢𝑛𝑑𝑠)𝑠𝑡 (defined as in Table 7), 𝑂𝐸𝐹 𝐼𝑂𝑠𝑡 (defined as in Table 3),
and additional stock-level control variables as in Greenwood and Thesmar (2011) in the vector 𝑋𝑠𝑡 including the lags of the log of
market capitalization of equity, past stock returns, book-to-market, the log of the unadjusted stock price, share turnover, amihud,
the log of firm age, and return skewness, measured as the third moment of daily total stock returns in the previous month. The
specification further includes month and stock fixed effects as indicated at the bottom of the panel. * / ** / *** indicate statistical
significance at the 10% / 5% / 1% level respectively, computed from standard errors that allow for double clustering at the stock
and month level.
Dependent variable

Total Vol

0.0030***
(5.19)

(3)
-0.0036
(-1.51)
0.0034***
(4.90)

(4)
0.0016
(0.74)
0.0011***
(2.66)

(5)
0.0023
(0.56)
0.0025***
(3.45)

Fixed effects

-0.0017***
(-19.40)
0.0003
(1.34)
0.0002
(1.21)
-0.0010***
(-11.26)
0.0033**
(2.26)
0.0615
(1.56)
-0.0017***
(-16.30)
0.0005***
(6.19)
Month

-0.0016***
(-19.05)
0.0004
(1.40)
0.0002
(1.37)
-0.0011***
(-11.24)
0.0034**
(2.29)
0.3196***
(8.92)
-0.0017***
(-16.23)
0.0005***
(6.17)
Month

-0.0016***
(-19.15)
0.0004
(1.41)
0.0002
(1.33)
-0.0011***
(-11.16)
0.0034**
(2.29)
0.3203***
(8.98)
-0.0017***
(-16.20)
0.0005***
(6.17)
Month

-0.0059***
(-7.42)
0.0006*
(1.89)
0.0001
(0.51)
-0.0031***
(-6.39)
0.0037***
(4.02)
0.1376***
(3.28)
-0.0009*
(-1.87)
0.0002*
(1.83)
Stock & Month

Observations
Adjusted R2

581,709
0.40

579,394
0.41

579,394
0.41

-0.0049***
(-9.27)
0.0004**
(2.04)
0.0001
(0.59)
-0.0017***
(-6.53)
0.0020***
(3.43)
0.1550***
(5.86)
-0.0009***
(-3.01)
0.0001*
(1.97)
Stock &
Month
579,394
0.60

(6)
0.0016
(0.36)
0.0021***
(2.82)
0.0030
(1.37)
-0.0059***
(-7.43)
0.0006*
(1.90)
0.0001
(0.52)
-0.0031***
(-6.39)
0.0037***
(4.03)
0.1374***
(3.28)
-0.0010*
(-1.93)
0.0002*
(1.83)
Stock & Month

579,394
0.60

579,394
0.60

√𝐹𝑟𝑎𝑔𝑖𝑙𝑖𝑡𝑦 (𝑂𝐸𝐹 𝑜𝑛𝑙𝑦)

(1)
0.0083***
(3.66)

√𝐹𝑟𝑎𝑔𝑖𝑙𝑖𝑡𝑦 (𝐴𝑙𝑙 𝑓𝑢𝑛𝑑𝑠)

(2)

Idiosyncratic Vol

OEF IO
Log MCAP
Pastreturn
BTM
Log Price
Turnover
Amihud
Log Firmage
Skewness

IA.36

Electronic copy available at: https://ssrn.com/abstract=2641078

Table IA.9: Changes in stock price fragility and volatility following the merger - Robustness tests
This table presents robustness tests for Table 7 using the treatment variables in raw form in Panels A and B. Panels C an D repeat
the test on the sample of overlapping stocks. Panels E to G present robustness tests for Table 7, Panel C: Panel E uses the treatment
variables in raw form, Panel F uses the sample of overlapping stocks, and Panel G implements the test on the semi-annual stock
panel (used in Tables 2, 3, or 5) and the semi-annual period indicators rather than a stock panel at the monthly frequency. All other
specifications are unchanged.

Panel A: Fragility, treatment variable IO BR+BGI
Dependent variable

√𝐹𝑟𝑎𝑔𝑖𝑙𝑖𝑡𝑦 (𝑂𝐸𝐹 𝑜𝑛𝑙𝑦)
All terms

Pre 1 × Treatment
Post 1 × Treatment
Post 2 × Treatment
Pre 1 × Passive Res. IO
Post 1 × Passive Res. IO
Post 2 × Passive Res. IO
Unreported
Fixed effects
Observations
Adjusted R2

Diagonal
terms

Off-diagonal
terms

(1)
(2)
(3)
-0.0434
-0.0660
0.0485
(-0.73)
(-1.21)
(1.18)
0.2686***
0.2773***
0.0835*
(4.20)
(4.58)
(1.92)
0.1674**
0.2003***
0.0606
(2.22)
(2.74)
(1.22)
0.0109
-0.0009
0.0250*
(0.50)
(-0.04)
(1.76)
-0.0158
-0.0164
-0.0097
(-0.66)
(-0.72)
(-0.68)
-0.0255
-0.0437*
0.0179
(-0.94)
(-1.66)
(1.09)
Controls, controls × period indicators
Stock & period
21,066
21,066
21,066
0.72
0.71
0.66

√𝐹𝑟𝑎𝑔𝑖𝑙𝑖𝑡𝑦 (𝐴𝑙𝑙 𝑓𝑢𝑛𝑑𝑠)
All terms

Diagonal
terms

Off-diagonal
terms

(4)
(5)
(6)
0.0144
-0.0562
-0.0960
(0.08)
(-0.39)
(-0.66)
-0.7473***
-0.7069***
-0.3248*
(-3.24)
(-3.85)
(-1.71)
-1.0016***
-0.7268***
-0.4456**
(-3.76)
(-3.34)
(-2.00)
0.0281
-0.0047
0.0478
(0.41)
(-0.09)
(0.92)
-0.0946
-0.0582
-0.0894
(-1.13)
(-0.86)
(-1.34)
-0.0751
-0.0722
0.0077
(-0.78)
(-0.91)
(0.10)
Controls, controls × period indicators
Stock & period
21,057
21,057
21,057
0.88
0.86
0.86

Panel B: Fragility, treatment variable DHERF
Dependent variable

√𝐹𝑟𝑎𝑔𝑖𝑙𝑖𝑡𝑦 (𝑂𝐸𝐹 𝑜𝑛𝑙𝑦)
All terms

Pre 1 × Treatment
Post 1 × Treatment
Post 2 × Treatment
Pre 1 × Passive Res. IO
Post 1 × Passive Res. IO
Post 2 × Passive Res. IO
Unreported
Fixed effects
Observations
Adjusted R2

Diagonal
terms

Off-diagonal
terms

(1)
(2)
(3)
1.2898
-0.0391
2.5796**
(0.76)
(-0.02)
(2.14)
5.5258***
6.0624***
1.2731
(3.03)
(3.28)
(0.93)
5.5567**
5.9394***
1.4403
(2.51)
(2.64)
(1.01)
-0.0025
-0.0154
0.0281***
(-0.14)
(-0.95)
(2.61)
0.0261
0.0258
0.0045
(1.35)
(1.40)
(0.40)
-0.0058
-0.0182
0.0266**
(-0.26)
(-0.82)
(2.09)
Controls, controls × period indicators
Stock & period
21,066
21,066
21,066
0.72
0.71
0.66

√𝐹𝑟𝑎𝑔𝑖𝑙𝑖𝑡𝑦 (𝐴𝑙𝑙 𝑓𝑢𝑛𝑑𝑠)
All terms

Diagonal
terms

Off-diagonal
terms

(4)
(5)
(6)
-11.4910
-10.1652*
-9.2919
(-1.48)
(-1.95)
(-1.32)
-26.2904**
-16.3373**
-18.6169**
(-2.49)
(-2.28)
(-2.07)
-31.8711***
-18.4532**
-21.0770**
(-2.86)
(-2.33)
(-2.21)
0.0648
0.0130
0.0536
(1.12)
(0.29)
(1.21)
-0.1802***
-0.1629***
-0.1066*
(-2.58)
(-2.89)
(-1.87)
-0.1957**
-0.1730**
-0.0270
(-2.36)
(-2.55)
(-0.38)
Controls, controls × period indicators
Stock & period
21,057
21,057
21,057
0.88
0.86
0.86

IA.37

Electronic copy available at: https://ssrn.com/abstract=2641078

Panel C: Fragility, treatment variable IO BR+BGI and sample of overlapping stocks
Dependent variable

√𝐹𝑟𝑎𝑔𝑖𝑙𝑖𝑡𝑦 (𝑂𝐸𝐹 𝑜𝑛𝑙𝑦)
All terms

Pre 1 × Treatment Quintiles
Post 1 × Treatment Quintiles
Post 2 × Treatment Quintiles
Pre 1 × Passive Res. IO Q.
Post 1 × Passive Res. IO Q.
Post 2 × Passive Res. IO Q.
Unreported
Fixed effects
Observations
Adjusted R2

Diagonal
terms

Off-diagonal
terms

(1)
(2)
(3)
-0.0006
-0.0010
0.0009*
(-0.78)
(-1.39)
(1.82)
0.0036***
0.0035***
0.0013**
(4.20)
(4.43)
(2.43)
0.0027**
0.0027***
0.0012*
(2.50)
(2.64)
(1.86)
0.0007
0.0004
0.0004
(0.85)
(0.57)
(0.91)
-0.0002
-0.0002
-0.0001
(-0.24)
(-0.31)
(-0.27)
-0.0009
-0.0014
0.0005
(-0.92)
(-1.41)
(0.90)
Controls, controls × period indicators
Stock & period
16,041
16,041
16,041
0.72
0.71
0.66

√𝐹𝑟𝑎𝑔𝑖𝑙𝑖𝑡𝑦 (𝐴𝑙𝑙 𝑓𝑢𝑛𝑑𝑠)
All terms

Diagonal
terms

Off-diagonal
terms

(4)
(5)
(6)
0.0039*
0.0021
0.0016
(1.67)
(1.08)
(0.93)
-0.0080***
-0.0078***
-0.0023
(-2.92)
(-3.45)
(-1.03)
-0.0117***
-0.0086***
-0.0045
(-3.34)
(-2.97)
(-1.58)
-0.0004
-0.0005
-0.0000
(-0.18)
(-0.28)
(-0.01)
-0.0031
-0.0020
-0.0024
(-1.11)
(-0.87)
(-1.13)
-0.0019
-0.0018
0.0012
(-0.57)
(-0.66)
(0.44)
Controls, controls × period indicators
Stock & period
16,041
16,041
16,041
0.88
0.85
0.85

Panel D: Fragility, treatment variable DHERF and sample of overlapping stocks
Dependent variable

√𝐹𝑟𝑎𝑔𝑖𝑙𝑖𝑡𝑦 (𝑂𝐸𝐹 𝑜𝑛𝑙𝑦)
All terms

Pre 1 × Treatment
Post 1 × Treatment
Post 2 × Treatment
Pre 1 × Passive Res. IO
Post 1 × Passive Res. IO
Post 2 × Passive Res. IO
Unreported
Fixed effects
Observations
Adjusted R2

Diagonal
terms

Off-diagonal
terms

(1)
(2)
(3)
1.1857
-0.1838
2.6075**
(0.69)
(-0.11)
(2.16)
4.6722***
5.1989***
1.0759
(2.60)
(2.84)
(0.79)
5.4599**
5.6849**
1.2573
(2.47)
(2.52)
(0.88)
0.0041
-0.0087
0.0268**
(0.21)
(-0.47)
(2.25)
0.0413*
0.0402*
0.0100
(1.95)
(1.96)
(0.78)
0.0069
-0.0087
0.0309**
(0.28)
(-0.36)
(2.17)
Controls, controls × period indicators
Stock & period
16,041
16,041
16,041
0.72
0.71
0.66

√𝐹𝑟𝑎𝑔𝑖𝑙𝑖𝑡𝑦 (𝐴𝑙𝑙 𝑓𝑢𝑛𝑑𝑠)
All terms

Diagonal
terms

Off-diagonal
terms

(4)
(5)
(6)
-10.2658
-8.9850*
-8.6826
(-1.31)
(-1.71)
(-1.22)
-24.1573**
-13.9347**
-18.1253**
(-2.29)
(-1.97)
(-2.01)
-31.2517***
-17.6338**
-21.1350**
(-2.79)
(-2.22)
(-2.19)
0.0584
0.0175
0.0283
(0.90)
(0.34)
(0.57)
-0.2647***
-0.2213***
-0.1527**
(-3.57)
(-3.74)
(-2.54)
-0.2579***
-0.2206***
-0.0588
(-2.88)
(-3.06)
(-0.77)
Controls, controls × period indicators
Stock & period
16,041
16,041
16,041
0.88
0.85
0.85

IA.38

Electronic copy available at: https://ssrn.com/abstract=2641078

Panel E: Volatility, monthly panel regressions
Treatment variable

IO BR+BGI

Dependent variable

Total Vol

For Sale × Treatment
Announce × Treatment
Complete × Treatment
For Sale × Passive Residual IO Quintiles
Announce × Passive Residual IO Quintiles
Complete × Passive Residual IO Quintiles
Unreported
Fixed effects
Observations
Adjusted R2

Idiosyncratic
Vol
(1)
(2)
0.0211
0.0577
(0.72)
(0.96)
-0.0640**
-0.1240**
(-2.54)
(-2.35)
-0.0568*
-0.1307*
(-1.83)
(-2.05)
0.0020*
0.0034*
(1.90)
(1.86)
-0.0010**
-0.0021**
(-2.15)
(-2.39)
-0.0011**
-0.0023**
(-2.44)
(-2.62)
Controls, controls × period
indicators
Stock, Period
125,361
125,355
0.63
0.65

DHERF
Total Vol

Idiosyncratic
Vol
(3)
(4)
-0.4986
-0.5507
(-1.03)
(-0.61)
-1.1479*
-2.2381*
(-1.89)
(-1.98)
-0.3047
-1.2544
(-0.49)
(-1.07)
0.0022*
0.0040*
(1.87)
(1.84)
-0.0014**
-0.0029**
(-2.59)
(-2.73)
-0.0016***
-0.0032***
(-3.08)
(-3.25)
Controls, controls × period
indicators
Stock, Period
125,361
125,355
0.63
0.65

Panel F: Volatility, monthly panel regressions on the sample of overlapping stocks only
Treatment variable

IO BR+BGI

Dependent variable

Total Vol

For Sale × Treatment Quintiles
Announce × Treatment Quintiles
Complete × Treatment Quintiles
For Sale × Passive Residual IO Quintiles
Announce × Passive Residual IO Quintiles
Complete × Passive Residual IO Quintiles
Unreported
Fixed effects
Observations
Adjusted R2

Idiosyncratic
Vol
(1)
(2)
0.0003
0.0008
(0.74)
(0.98)
-0.0009**
-0.0017**
(-2.47)
(-2.29)
-0.0009*
-0.0020**
(-1.97)
(-2.13)
0.0017*
0.0029
(1.84)
(1.70)
-0.0009*
-0.0021**
(-1.83)
(-2.38)
-0.0008
-0.0020**
(-1.65)
(-2.29)
Controls, controls × period
indicators
Stock, Period
96,986
96,980
0.65
0.67

DHERF
Total Vol

Idiosyncratic
Vol
(3)
(4)
0.0001
0.0005
(0.43)
(0.89)
-0.0009**
-0.0017**
(-2.74)
(-2.60)
-0.0009**
-0.0019**
(-2.08)
(-2.30)
0.0018*
0.0031
(1.76)
(1.69)
-0.0009*
-0.0022**
(-1.85)
(-2.44)
-0.0008*
-0.0022**
(-1.78)
(-2.46)
Controls, controls × period
indicators
Stock, Period
96,986
96,980
0.65
0.67

IA.39

Electronic copy available at: https://ssrn.com/abstract=2641078

Panel G: Volatility, semi-annual panel regressions
Treatment variable

IO BR+BGI

Dependent variable

Total Vol

Pre 1 × Treatment Quintiles
Post 1 × Treatment Quintiles
Post 2 × Treatment Quintiles
Pre 1 × Passive Residual IO Quintiles
Post 1 × Passive Residual IO Quintiles
Post 2 × Passive Residual IO Quintiles
Unreported
Fixed effects
Observations
Adjusted R2

Idiosyncratic
Vol
(1)
(2)
-0.0001
0.0001
(-0.49)
(0.18)
-0.0014***
-0.0023***
(-6.18)
(-6.37)
-0.0013***
-0.0022***
(-5.65)
(-6.09)
0.0013***
0.0023***
(5.69)
(6.44)
-0.0005**
-0.0013***
(-2.00)
(-3.47)
-0.0003
-0.0009**
(-1.33)
(-2.44)
Controls, controls × period
indicators
Stock, Period
21,218
21,218
0.80
0.80

DHERF
Total Vol

Idiosyncratic
Vol
(3)
(4)
-0.0000
0.0002
(-0.13)
(0.65)
-0.0017***
-0.0026***
(-7.64)
(-7.53)
-0.0013***
-0.0021***
(-5.79)
(-5.87)
0.0013***
0.0021***
(5.37)
(6.01)
-0.0002
-0.0010**
(-1.05)
(-2.58)
-0.0003
-0.0009**
(-1.20)
(-2.45)
Controls, controls × period
indicators
Stock, Period
21,218
21,218
0.80
0.80

IA.40

Electronic copy available at: https://ssrn.com/abstract=2641078

Table IA.10: Evidence from other asset management mergers – Robustness tests
This table presents robustness tests for Table 8. Panel A presents robustness tests for Table 8, Panel A using the sample of overlapping stocks throughout. All other specifications
are unchanged. Panels B and C repeat Table 8, Panel B but add an additional liquidity measure 𝑇𝑢𝑟𝑛𝑜𝑣𝑒𝑟𝑠𝑡 and also use the sample of overlapping stocks only in Panel C. Panel D
presents an additional placebo test based on Table 8, Panel A that omits the treatment variable. The remaining panels examine changes in stock price fragility and volatility
following other asset management mergers. The specifications are analogous to the ones presented in Table 7 but for the sample of other asset management mergers used in Table
8 and different combinations of the treatment variable and the full sample or the sub-sample of overlapping stocks only.

Panel A: Portfolio rebalancing by residual funds – sample of overlapping stocks
Sample

All mergers

Treatment variable

IO Buyer + Target

Post × Treatment

DHERF

(1)
-1.4760*
(-1.80)

Post × Treatment Quintiles

(2)

(3)

(4)

Post 2 × Treatment

-0.0007
(-0.23)
-0.0064**
(-1.96)
-0.0096***
(-2.94)

Post 1 × Treatment Quintiles
Post 2 × Treatment Quintiles

Post 1 × Residual IO
Post 2 × Residual IO

(6)

(7)

(8)

0.0000
(0.00)
-0.0058**
(-2.26)
-0.0064**
(-2.42)

0.0006
(0.28)
-0.0051**
(-2.17)
-0.0073***
(-2.97)

-0.0012
(-0.48)

-0.0012
(-0.48)

-0.0049***
(-2.66)

Pre 1 × Treatment Quintiles

Pre 1 × Residual IO

(5)

0.0576
(0.06)
-2.9459**
(-2.52)
-1.9273*
(-1.96)

Post 1 × Treatment

Post × Residual IO Quintiles

DHERF

% NetBuy

-0.0014
(-0.67)

Pre 1 × Treatment

Post × Residual IO

IO Buyer + Target

ΔSharesHeld

Dependent variable

0.0016
(0.61)
-0.0035
(-1.18)
-0.0087***
(-2.97)

0.0510
(1.25)
-0.0002
(-0.07)

0.0025
(1.17)
0.0229
(0.49)
0.0919
(1.59)
0.0777*
(1.70)

Pre 1 × Residual IO Q.

-0.0014
(-0.44)

-0.0014
(-0.43)

IA.41

Electronic copy available at: https://ssrn.com/abstract=2641078

Post 1 × Residual IO Q.

0.0002
(0.05)
0.0022
(0.61)
Controls, controls × period indicators
Deal, stock & period
26,035
26,035
26,035
0.28
0.27
0.27

Post 2 × Residual IO Q.
Unreported
Fixed effects
Observations
Adjusted R2

26,035
0.28

0.0002
(0.05)
0.0021
(0.60)

26,035
0.27

-0.0015
-0.0015
(-0.49)
(-0.50)
0.0045
0.0045
(1.48)
(1.47)
Controls, controls × period indicators
Deal, stock & period
26,035
26,035
26,035
0.32
0.32
0.32

Panel B: Stock market effects including additional columns for liquidity measure Turnover
Sample

All mergers

Treatment
variable
Dependent
variable

Pre ×
Treatment Q.
M&A Process ×
Treatment Q.
Completion ×
Treatment Q.
Pre ×
Residual IO Q.
M&A Process ×
Residual IO Q.
Completion ×
Residual IO Q.
Unreported
Fixed effects
Observations
Adjusted R2

IO Buyer + Target
WM-adj.
returns

LM-adj.
returns

(1)
-0.0230
(-0.67)
-0.186***
(-5.48)
-0.0179
(-0.70)
-0.0388
(-1.10)
0.0848
(0.25)
0.6494**
(2.43)

(2)
(3)
(4)
(5)
-0.0239
-0.0507
-0.0000
0.0000
(-0.66)
(-1.57)
(-0.37)
(0.55)
-0.195***
-0.110*** 0.0001*** -0.000***
(-5.46)
(-3.45)
(2.73)
(-4.20)
-0.0189
0.0067
0.0001*** -0.0002**
(-0.70)
(0.28)
(3.29)
(-2.39)
-0.0409
-0.0122
0.0000
-0.0000
(-1.10)
(-0.37)
(0.32)
(-0.02)
0.0897
-0.3827
0.0005
0.0037***
(0.25)
(-1.20)
(0.90)
(3.73)
0.6837**
0.1581
0.0003
0.0018*
(2.43)
(0.65)
(0.59)
(1.89)
Controls, controls × period indicators
Deal, stock & period
265,873
265,873
265,873
265,846
0.02
0.02
0.68
0.57

265,873
0.02

DGTWadj.
returns

DHERF

Amihud

Turnover

Log
Trading
Vol.

WM-adj.
returns

LM-adj.
returns

(6)
-0.0031
(-1.12)
-0.016***
(-5.09)
-0.014***
(-3.96)
0.0157***
(5.00)
0.2536***
(6.22)
0.2489***
(5.45)

(7)
-0.0363
(-1.24)
-0.1447***
(-4.79)
-0.0724***
(-3.03)
-0.0285
(-0.82)
0.2057
(0.59)
0.7224***
(2.68)

265,873
0.95

265,873
0.03

(8)
(9)
(10)
(11)
-0.0381
-0.0187
0.0001
0.0000
(-1.23)
(-0.70)
(1.44)
(0.59)
-0.15***
-0.119*** 0.0002***
-0.0000
(-4.78)
(-4.21)
(3.54)
(-0.07)
-0.08***
-0.074***
0.0001
-0.0000
(-3.03)
(-3.39)
(1.50)
(-0.64)
-0.0300
-0.0108
0.0000
0.0000
(-0.82)
(-0.34)
(0.77)
(0.56)
0.2167
-0.2784
0.0003
0.0035***
(0.59)
(-0.87)
(0.49)
(3.67)
0.761***
0.2377
0.0002
0.0017*
(2.68)
(0.97)
(0.48)
(1.82)
Controls, controls × period indicator
Deal, stock & period
265,873
265,873
265,873
265,846
0.03
0.02
0.69
0.57

IA.42

Electronic copy available at: https://ssrn.com/abstract=2641078

DGTWadj.
returns

Amihud

Turnover

Log
Trading
Vol.
(12)
0.0043*
(1.68)
0.0011
(0.40)
-0.010***
(-3.36)
0.0157***
(4.93)
0.2513***
(6.16)
0.2585***
(5.62)

265,873
0.95

Panel C: Stock market effects – sample of overlapping stocks
Sample

All mergers

Treatment
variable
Dependent
variable

Pre ×
Treatment Q.
M&A Process ×
Treatment Q.
Completion ×
Treatment Q.
Pre ×
Residual IO Q.
M&A Process ×
Residual IO Q.
Completion ×
Residual IO Q.
Unreported
Fixed effects
Observations
Adjusted R2

IO Buyer + Target
WM-adj.
returns

LM-adj.
returns

(1)
-0.087**
(-2.05)
-0.168***
(-4.16)
-0.024
(-0.76)
-0.000
(-0.00)
1.066**
(2.46)
1.162***
(3.30)

(2)
(3)
(4)
(5)
-0.091**
-0.077*
-0.000
0.000
(-2.04)
(-1.96)
(-0.22)
(0.76)
-0.177***
-0.111***
0.000*
-0.000***
(-4.14)
(-2.92)
(1.90)
(-2.92)
-0.025
-0.003
0.000***
-0.000
(-0.76)
(-0.09)
(3.31)
(-1.51)
-0.000
0.024
-0.000
-0.000**
(-0.00)
(0.56)
(-0.78)
(-2.41)
1.122**
0.631
-0.001
0.000
(2.46)
(1.61)
(-1.17)
(0.44)
1.223***
0.637**
0.000
-0.001
(3.30)
(2.06)
(0.28)
(-0.43)
Controls, controls × period indicators
Deal, stock & period
158,313
158,313
158,313
158,296
0.04
0.03
0.70
0.56

158,313
0.04

DGTWadj.
returns

DHERF

Amihud

Turnover

Log
Trading
Vol.

WM-adj.
returns

LM-adj.
returns

(6)

-0.004
(-0.93)
0.077
(1.53)
0.184***
(3.13)

(7)
-0.0796*
(-1.76)
-0.1103**
(-2.57)
0.0015
(0.04)
0.0011
(0.02)
1.0350**
(2.39)
1.1503***
(3.27)

158,313
0.96

158,313
0.02

(8)
(9)
(10)
(11)
-0.0835*
-0.0587
-0.0000
0.0001
(-1.76)
(-1.41)
(-0.66)
(0.95)
-0.1156**
-0.083**
0.0001*
-0.000***
(-2.56)
(-2.07)
(1.80)
(-2.70)
0.0015
0.0014
0.0001*
-0.0001
(0.04)
(0.05)
(1.83)
(-1.17)
0.0011
0.0241
-0.0001
-0.0002**
(0.02)
(0.56)
(-0.78)
(-2.42)
1.0895**
0.6137
-0.0010
0.0005
(2.39)
(1.57)
(-1.18)
(0.45)
1.2109***
0.635**
0.0002
-0.0006
(3.27)
(2.06)
(0.33)
(-0.45)
Controls, controls × period indicator
Deal, stock & period
158,313
158,313
158,313
158,296
0.02
0.02
0.70
0.56

-0.0048
(-1.41)
-0.0105***
(-2.86)
-0.0146***
(-3.46)

IA.43

Electronic copy available at: https://ssrn.com/abstract=2641078

DGTWadj.
returns

Amihud

Turnover

Log
Trading
Vol.
(12)
-0.0042
(-1.18)
-0.012***
(-3.00)
-0.011***
(-2.70)
-0.0037
(-0.89)
0.0784
(1.55)
0.1826***
(3.09)

158,313
0.96

Panel D: Additional placebo tests omitting the treatment variable
Treatment variable

IO Buyer + Target
ΔSharesHeld

Dependent variable

Post x Treatment Q.
Post x Residual IO Q.

(1)
-0.0043***
(-2.17)

(2)

-0.0003
(-0.02)

ΔSharesHeld
(3)
-0.0042***
(-3.33)
0.0000
(0.01)

Pre1 x Treatment Q.

-0.0031
(-1.02)
-0.0115***
(-2.70)
-0.0123***
(-4.19)

Post1 x Treatment Q.
Post2 x Treatment Q.
Pre1 x Residual IO Q.
Post1 x Residual IO Q.
Post1 x Residual IO Q.
Unreported
Fixed effects
Observations
Adjusted R2

(4)

Controls, controls × period indicators
Deal, stock & Period
44,170
44,163
44,163
0.24
0.25
0.26

(5)

(6)

-0.0021
(-1.15)
-0.0100***
(-4.90)
-0.0118***
(-5.92)
0.0007
0.0006
(0.35)
(0.30)
0.0026
0.0019
(1.17)
(0.86)
0.0039*
0.0031
(1.84)
(1.47)
Controls, controls × period indicators
Deal, stock & period
44,170
44,163
44,163
0.24
0.26
0.26

IA.44

Electronic copy available at: https://ssrn.com/abstract=2641078

Panel E: Fragility, treatment variable IO Buyer + Target
Dependent variable

√𝐹𝑟𝑎𝑔𝑖𝑙𝑖𝑡𝑦 (𝑂𝐸𝐹 𝑜𝑛𝑙𝑦)
All terms

Pre 1 × Treatment Quintiles
Post 1 × Treatment Quintiles
Post 2 × Treatment Quintiles
Pre 1 × Residual IO Quintiles
Post 1 × Residual IO Quintiles
Post 2 × Residual IO Quintiles
Unreported
Fixed effects
Observations
Adjusted R2

Diagonal terms

√𝐹𝑟𝑎𝑔𝑖𝑙𝑖𝑡𝑦 (𝐴𝑙𝑙 𝑓𝑢𝑛𝑑𝑠)
Off-diagonal terms

(1)
(2)
(3)
0.0001
0.0001
-0.0000
(0.50)
(0.62)
(-0.15)
0.0014***
0.0010***
0.0015***
(5.10)
(3.88)
(6.68)
0.0018***
0.0014***
0.0014***
(5.28)
(4.37)
(5.62)
-0.0007***
-0.0004*
-0.0008***
(-3.25)
(-1.80)
(-4.88)
0.0003
-0.0001
-0.0001
(0.91)
(-0.36)
(-0.24)
-0.0003
-0.0001
-0.0014***
(-0.87)
(-0.38)
(-5.55)
Controls, controls × period indicators
Deal, stock & period
45,705
45,705
45,705
0.65
0.65
0.47

All terms

Diagonal terms

Off-diagonal terms

(4)
(5)
(6)
0.0004
0.0004
-0.0016
(0.36)
(0.56)
(-1.42)
-0.0034***
-0.0032***
-0.0040***
(-2.80)
(-3.20)
(-3.17)
-0.0031**
-0.0027**
-0.0036**
(-2.15)
(-2.33)
(-2.40)
-0.0007
-0.0009
0.0008
(-0.62)
(-1.08)
(0.70)
-0.0072***
-0.0046***
-0.0038***
(-5.53)
(-4.32)
(-2.92)
-0.0056***
-0.0047***
-0.0007
(-3.69)
(-3.73)
(-0.51)
Controls, controls × period indicators
Deal, stock & period
45,705
45,705
45,705
0.79
0.76
0.70

Panel F: Fragility, treatment variable IO Buyer + Target – sample of overlapping stocks
Dependent variable

√𝐹𝑟𝑎𝑔𝑖𝑙𝑖𝑡𝑦 (𝑂𝐸𝐹 𝑜𝑛𝑙𝑦)
All terms

Pre 1 × Treatment Quintiles
Post 1 × Treatment Quintiles
Post 2 × Treatment Quintiles
Pre 1 × Residual IO Quintiles
Post 1 × Residual IO Quintiles
Post 2 × Residual IO Quintiles
Unreported
Fixed effects
Observations
Adjusted R2

Diagonal terms

√𝐹𝑟𝑎𝑔𝑖𝑙𝑖𝑡𝑦 (𝐴𝑙𝑙 𝑓𝑢𝑛𝑑𝑠)
Off-diagonal terms

(1)
(2)
(3)
0.0002
0.0002
0.0001
(0.80)
(0.75)
(0.45)
0.0016***
0.0013***
0.0011***
(4.17)
(3.74)
(4.17)
0.0015***
0.0015***
0.0005*
(3.00)
(3.20)
(1.72)
-0.0006*
-0.0001
-0.0010***
(-1.93)
(-0.45)
(-4.36)
-0.0000
-0.0002
-0.0003
(-0.02)
(-0.52)
(-1.17)
-0.0003
-0.0001
-0.0010***
(-0.51)
(-0.30)
(-2.91)
Controls, controls × period indicators
Deal, stock & period
26,782
26,782
26,782
0.69
0.70
0.49

All terms

Diagonal terms

Off-diagonal terms

(4)
(5)
(6)
0.0005
0.0008
-0.0010
(0.46)
(0.83)
(-0.76)
-0.0038**
-0.0026**
-0.0055***
(-2.53)
(-2.09)
(-3.52)
-0.0060***
-0.0040***
-0.0070***
(-3.37)
(-2.74)
(-3.75)
0.0002
-0.0007
0.0008
(0.13)
(-0.67)
(0.60)
-0.0048***
-0.0032**
-0.0020
(-3.07)
(-2.49)
(-1.27)
-0.0013
-0.0021
0.0032*
(-0.66)
(-1.36)
(1.71)
Controls, controls × period indicators
Deal, stock & period
26,782
26,782
26,782
0.82
0.79
0.73

IA.45

Electronic copy available at: https://ssrn.com/abstract=2641078

Panel G: Fragility, treatment variable DHERF – sample of overlapping stocks
Dependent variable

√𝐹𝑟𝑎𝑔𝑖𝑙𝑖𝑡𝑦 (𝑂𝐸𝐹 𝑜𝑛𝑙𝑦)
All terms

Pre 1 × Treatment Quintiles
Post 1 × Treatment Quintiles
Post 2 × Treatment Quintiles
Pre 1 × Residual IO Quintiles
Post 1 × Residual IO Quintiles
Post 2 × Residual IO Quintiles
Unreported
Fixed effects
Observations
Adjusted R2

Diagonal terms

√𝐹𝑟𝑎𝑔𝑖𝑙𝑖𝑡𝑦 (𝐴𝑙𝑙 𝑓𝑢𝑛𝑑𝑠)
Off-diagonal terms

(1)
(2)
(3)
0.0003
0.0002
0.0002
(1.06)
(0.65)
(1.00)
0.0018***
0.0016***
0.0008***
(4.75)
(4.33)
(2.99)
0.0013***
0.0014***
-0.0000
(2.66)
(3.03)
(-0.08)
-0.0006*
-0.0001
-0.0010***
(-1.92)
(-0.44)
(-4.38)
-0.0000
-0.0002
-0.0003
(-0.02)
(-0.51)
(-1.18)
-0.0003
-0.0002
-0.0010***
(-0.52)
(-0.31)
(-2.92)
Controls, controls × period indicators
Deal, stock & period
26,782
26,782
26,782
0.69
0.70
0.49

All terms

Diagonal terms

Off-diagonal terms

(4)
(5)
(6)
-0.0005
0.0010
-0.0026*
(-0.41)
(1.00)
(-1.81)
-0.0048***
-0.0030**
-0.0057***
(-3.12)
(-2.45)
(-3.65)
-0.0054***
-0.0034**
-0.0069***
(-3.11)
(-2.44)
(-3.82)
0.0001
-0.0007
0.0008
(0.12)
(-0.67)
(0.58)
-0.0048***
-0.0032**
-0.0020
(-3.09)
(-2.49)
(-1.29)
-0.0013
-0.0021
0.0031*
(-0.67)
(-1.36)
(1.69)
Controls, controls × period indicators
Deal, stock & period
26,782
26,782
26,782
0.82
0.79
0.73

Panel H: Volatility, monthly panel regressions – sample of overlapping stocks
Treatment variable
Dependent variable
Pre × Treatment Q.
M&A Process × Treatment Q.
Completion × Treatment Q.
Pre × Residual IO Q.
M&A Process × Residual IO Q.
Completion × Residual IO Q.
Unreported
Fixed effects
Observations
Adjusted R2

IO BR+BGI
Total Vol
Idiosyncratic Vol
(1)
(2)
-0.0000
0.0000
(-0.36)
(0.11)
-0.0003***
-0.0006***
(-5.74)
(-6.49)
-0.0001*
-0.0002**
(-1.75)
(-2.20)
-0.0002***
-0.0005***
(-3.77)
(-4.65)
0.0002
-0.0002
(0.31)
(-0.23)
0.0004
0.0008
(0.75)
(0.84)
Controls, controls × period indicators
Deal, stock, Period
156,513
156,513
0.57
0.59

IA.46

Electronic copy available at: https://ssrn.com/abstract=2641078

DHERF
Total Vol
Idiosyncratic Vol
(3)
(4)
-0.0000
-0.0001
(-0.89)
(-0.67)
-0.0003***
-0.0007***
(-6.25)
(-7.19)
-0.0001*
-0.0002**
(-1.67)
(-2.27)
-0.0002***
-0.0005***
(-3.71)
(-4.58)
0.0002
-0.0003
(0.30)
(-0.25)
0.0004
0.0008
(0.74)
(0.84)
Controls, controls × period indicators
Deal, stock, Period
156,513
156,513
0.57
0.59

Table IA.11: Testing the informed trading hypothesis
This tables examine holdings-based performance of BlackRock funds around the merger with BGI to test the alternative informed trading hypothesis. The sample includes all funds
managed by BlackRock prior to the merger and the sample period covers the 2 years around the merger event date (as in the previous analysis). The dependent variable measures
semi-annual holding returns (adjusted for risk via different benchmark portfolios): 𝐿𝑀 − 𝑎𝑑𝑗 𝐻𝑅𝐸𝑇𝑓𝑡+1 is the semi-annual holding return of fund f in period t+1 where individual
stock returns are benchmarked against the local market portfolio of the stock, 𝑊𝑀 − 𝑎𝑑𝑗 𝐻𝑅𝐸𝑇𝑓𝑡+1 the semi-annual holding return of fund f in period t+1 where individual stock
returns are benchmarked against the world market portfolio, and 𝐷𝐺𝑇𝑊 − 𝑎𝑑𝑗 𝐻𝑅𝐸𝑇𝑓𝑡+1 the semi-annual holding return of fund f in period t+1 where individual stock returns are
benchmarked against the international size-value-momentum sorted portfolios. All holding returns are winsorized at the top and bottom 1%-level. The main explanatory variables
are computed from the June 2009 holdings of these funds and measure the (value- or equally-weighed) exposure of these funds to stocks affected by the merger with BGI. For
example, 𝑉𝑊 𝐼𝑂 𝐵𝑅 + 𝐵𝐺𝐼𝑓 is the holding-value-weighted average of 𝐼𝑂 𝐵𝑅 + 𝐵𝐺𝐼𝑠 across all stocks held by fund f as of June 2009. These variables are interacted with the 𝑃𝑜𝑠𝑡𝑡
indicator which is equal to 1 for the two semi-annual periods following the completion of the merger in December 2009 and 0 otherwise. The estimated regression specification is:
𝐻𝑅𝐸𝑇𝑓𝑡+1 = 𝛽𝑃𝑜𝑠𝑡𝑡 × 𝐴𝑣𝑔 𝐼𝑂 𝐵𝑅 + 𝐵𝐺𝐼𝑓 + 𝛼𝑡 + 𝛼𝑓 + 𝜖𝑓𝑡+1 .
Panel A uses 𝐸𝑊 (𝑉𝑊) 𝐼𝑂 𝐵𝑅 + 𝐵𝐺𝐼𝑠 as the treatment variable for the individual stocks, Panel B uses the alternative treatment variable 𝐸𝑊 (𝑉𝑊)𝐷𝐻𝐸𝑅𝐹𝑠 . * / ** / *** indicate
statistical significance at the 10% / 5% / 1% level, computed from standard errors that allow for clustering at the fund level.

Panel A: Performance of BlackRock funds around the merger
Dependent variable
POST × EW IO BR+BGI

LM-adj HRET
(1)
0.2137
(0.62)

(2)

POST × EW IO BR+BGI Quintiles

(3)

(5)
0.8047
(1.42)

(6)

DGTW-adj HRET
(9)
0.8140
(1.43)

(10)

0.0072
(1.03)

POST × VW IO BR+BGI

0.0918
(0.25)

0.1454
(0.26)

POST × VW IO BR+BGI Quintiles
Fixed effects
Observations
Adjusted R2

WM-adj HRET
(4)

1,064
0.19

1,064
0.19

1,064
0.16

0.0051
(0.67)
Fund & period
1,064
1,064
0.15
0.24

IA.47

Electronic copy available at: https://ssrn.com/abstract=2641078

1,064
0.24

0.2522
(0.49)

1,064
0.21

1,064
0.20

Panel B: Alternative treatment variable DHERF
Dependent variable
POST × EW DHERF

LM-adj HRET
(1)
-5.9837
(-0.69)

(2)

POST × EW DHERF Quintiles

(3)

(4)

(5)
7.0421
(0.61)

(6)

DGTW-adj HRET
(9)
-3.6795
(-0.22)

(10)

0.0049
(0.91)

POST × VW DHERF

-0.4600
(-0.04)

0.1598
(0.01)

POST × VW DHERF Quintiles
Fixed effects
Observations
Adjusted R2

WM-adj HRET

1,064
0.19

1,064
0.19

1,064
0.16

0.0053
(0.91)
Fund & period
1,064
1,064
0.16
0.24

IA.48

Electronic copy available at: https://ssrn.com/abstract=2641078

1,064
0.24

-0.7269
(-0.05)

1,064
0.20

1,064
0.20

Table IA.12: Testing the anticipated trading hypothesis
This table examines the trading behavior of BlackRock funds around the merger to rule out that residual funds trade in anticipation of increased trading by BlackRock funds following
the merger. Columns 1 and 2 of Panel A repeat the specifications of Table 2, Columns 3 and 4 but replace the dependent variable with an equivalent version computed from position
changes of BlackRock funds only. Columns 3 and 4 repeat the specifications of Table 2, Columns 3 and 4 for comparison. In Panel B, we provide additional tests. Columns 1 and 2
exclude stock with combined BlackRock-BGI ownership > 5% to understand if the results are sensitive to stock for which the merger potentially triggers additional disclosure
requirements. Columns 3 and 4 examine if either BlackRock funds (column 3) or Residual Funds (column 4) trade stocks with combined BlackRock-BGI ownership > 5% differently
compared to other stocks. Columns 5 and 6 make the same comparison but only relative to stocks in the highest quintile of combined BlackRock-BGI ownership (i.e., in columns 5
and 6, we restrict the sample to stocks in the top quintile of the treatment variable 𝐼𝑂 𝐵𝑅 + 𝐵𝐺𝐼𝑠 and the treatment variable is re-defined as an indicator equal to 1 if the treatment
variable is above 5% and 0 otherwise. We label this indicator Indicator > 5%). All other specifications are unchanged.

Panel A: Portfolio rebalancing by BlackRock versus Residual funds
Sample

All stocks

Treatment variable
Funds included
Dependent variable
Pre 1 × Treatment
Post 1 × Treatment
Post 2 × Treatment
Pre 1 × Treatment Quintiles
Post 1 × Treatment Quintiles
Post 2 × Treatment Quintiles
Unreported
Fixed effects
Observations
Adjusted R2

IO BR+BGI
BlackRock funds

Residual funds

ΔSharesHeld (BlackRock)
ΔSharesHeld
(1)
(2)
(3)
(4)
0.0976
0.3258
(0.15)
(1.20)
0.3760
-1.3952***
(0.65)
(-5.09)
0.7371
-0.6522**
(1.22)
(-2.30)
0.0106
0.0054
(1.25)
(1.39)
-0.0100
-0.0174***
(-1.36)
(-4.52)
-0.0065
-0.0111***
(-0.87)
(-2.74)
Controls × period indicators
Stock & period
19,223
19,223
22,732
22,732
0.33
0.33
0.12
0.12

IA.49

Electronic copy available at: https://ssrn.com/abstract=2641078

Panel B: Portfolio rebalancing by BlackRock versus Residual funds – stocks with >5% combined BlackRock-BGI ownership
Sample
Treatment variable

All stocks excluding stocks with
IO BR+BGI > 5%

All stocks

Stocks in top quintile of IO
BR+BGI only

IO BR+BGI

IO BR+BGI

Indicator if IO BR+BGI > 5%

Funds included

BlackRock
funds

Residual Funds

Dependent variable

ΔSharesHeld
(BlackRock)
(1)
0.4488
(0.62)
-0.7164
(-1.12)
0.2208
(0.33)

ΔSharesHeld

Pre 1 × Treatment
Post 1 × Treatment
Post 2 × Treatment

(2)
0.4832
(1.59)
-1.5787***
(-5.20)
-0.9206***
(-2.91)

Pre 1 × Indicator > 5%
Post 1 × Indicator > 5%
Post 2 × Indicator > 5%
Pre 1 × Treatment × Indicator > 5%
Post 1 × Treatment × Indicator > 5%
Post 2 × Treatment × Indicator > 5%
Unreported
Fixed effects
Observations
Adjusted R2

Controls × period indicators
Stock & period
18,451
21,959
0.34
0.11

BlackRock funds

Residual Funds

ΔSharesHeld
ΔSharesHeld
(BlackRock)
(3)
(4)
0.3742
0.4973
(0.52)
(1.64)
-0.7451
-1.5939***
(-1.16)
(-5.26)
0.2247
-0.9392***
(0.34)
(-2.97)
-1.4607
0.8428*
(-1.37)
(1.77)
-0.8314
0.1833
(-0.67)
(0.39)
-0.6016
1.0344**
(-0.52)
(2.35)
24.5565
-16.2178*
(1.25)
(-1.87)
14.7403
-3.4213
(0.65)
(-0.39)
9.4979
-18.2321**
(0.45)
(-2.28)
Controls × period indicators
Stock & period
19,223
22,732
0.35
0.11

IA.50

Electronic copy available at: https://ssrn.com/abstract=2641078

BlackRock
funds

Residual funds

ΔSharesHeld
(BlackRock)
(5)

ΔSharesHeld

-0.0584*
(-1.90)
0.0031
(0.09)
-0.0414
(-1.20)

0.0005
(0.04)
-0.0229
(-1.60)
0.0071
(0.47)

(6)

Controls × period indicators
Stock & period
4,545
4,545
0.59
0.17

Table IA.13: Replication of main results on 13F data
This table replicates the main results of the paper using data from 13F filings to construct our main treatment variable IO BR+BGI. All outcome variables are unchanged. The sample
of stocks includes all stocks held by 13F filer “Barclays Inc.” as of June 2009 with non-missing information for stock characteristics in 13F and Compustat. Definitions of all variables
are identical to their counterparts in the previous tables. For the definition of the main treatment variable IO BR+BGI and the control variable Δ 𝐼𝑂 𝐵𝑙𝑎𝑐𝑘𝑅𝑜𝑐𝑘, all holdings
information is now obtained at the institution-level from 13F filings. Firm-level control variables are constructed using Compustat data. Panels A and B replicate the main findings
on portfolio rebalancing by all institutional funds in FactSet (Panel A) or separately for OEF and non-OEF (Panel B) using the treatment variable IO BR+BGI 13F. Panel C replicates
the main findings of negative daily abnormal return around the antitrust approval date. All other specifications are unchanged. * / ** / *** indicate statistical significance at the 10%
/ 5% / 1% level, computed from standard errors that allow for clustering at the stock level in Panels A and B or clustering at the stock and trading day level in Panel C.

Panel A: Portfolio rebalancing by residual funds, treatment variable IO BR+BGI constructed from 13F data, control variables from Compustat
ΔSharesHeld

Dependent variable
Post × IO BR+BGI 13F

(1)
-0.3610*
(-1.83)

(2)

% NetBuy
(3)

-0.0106**
(-2.25)

Post × IO BR+BGI 13F Quintiles
Pre 1 × IO BR+BGI 13F

Post 2 × IO BR+BGI 13F

Post 1 × IO BR+BGI 13F Quintiles
Post 2 × IO BR+BGI 13F Quintiles

Pastreturn Compustat
Log BTM Compustat
Dividend Yield Compustat
ROE Compustat
Leverage Compustat

(6)

-0.0113**
(-2.32)

Pre 1 × IO BR+BGI 13F Quintiles

Log MCAP Compustat

(5)

0.1676
(0.65)
-0.5307**
(-2.01)
-0.2258
(-0.61)

Post 1 × IO BR+BGI 13F

Δ IO BlackRock 13F

(4)

0.5255*
(1.73)
0.0211
(0.92)
0.0723***
(5.27)
-0.0417**
(-2.09)
-0.1251
(-1.07)
0.0118
(1.56)
0.0009
(0.02)

0.5519*
(1.83)
0.0203
(0.89)
0.0720***
(5.23)
-0.0419**
(-2.10)
-0.1301
(-1.11)
0.0119
(1.56)
0.0002
(0.01)

0.1285
(0.27)
0.0364
(1.56)
0.1309***
(5.24)
-0.0519**
(-2.49)
-0.1880
(-1.45)
0.0079
(0.86)
-0.0064
(-0.16)

0.0050
(0.84)
-0.0107*
(-1.76)
-0.0103
(-1.05)
0.1416
(0.30)
0.0359
(1.54)
0.1311***
(5.24)
-0.0522**
(-2.51)
-0.1924
(-1.49)
0.0080
(0.87)
-0.0071
(-0.17)

IA.51

Electronic copy available at: https://ssrn.com/abstract=2641078

0.9458**
(2.47)
0.0305
(1.29)
0.0896***
(6.29)
-0.0508**
(-2.40)
-0.3068**
(-2.25)
0.0205**
(2.58)
0.0106
(0.24)

-0.0026
(-0.47)
-0.0110*
(-1.81)
-0.0238**
(-2.41)
-0.0732
(-0.12)
0.0396*
(1.70)
0.1444***
(5.72)
-0.0602***
(-2.85)
-0.3359**
(-2.09)
0.0160*
(1.75)
0.0115
(0.26)

Cash Compustat
Unreported
Fixed effects
Observations
Adjusted R2

0.0783***
(2.81)

9,853
0.22

0.0789***
0.0812***
(2.84)
(2.66)
Controls × period indicators
Stock & period
9,853
9,853
0.22
0.24

0.0814***
(2.67)

0.0819**
0.0643*
(2.45)
(1.81)
Controls × period indicators
Stock & period
9,853
9,853
0.30
0.31

9,853
0.24

Panel B: Portfolio rebalancing by fund type, treatment variable IO BR+BGI constructed from 13F data, control variables from Compustat
Sample

OEF

Non-OEF

(1)
-0.0204***
(-3.18)

Pre 1 × IO BR+BGI 13F Quintiles
Post 1 × IO BR+BGI 13F Quintiles
Post 2 × IO BR+BGI 13F Quintiles
Δ IO BlackRock 13F
Log MCAP Compustat
Pastreturn Compustat
Log BTM Compustat
Dividend Yield Compustat
ROE Compustat
Leverage Compustat
Cash Compustat
Unreported
Fixed effects
Observations
Adjusted R2

Non-OEF

(3)

(4)

ΔSharesHeld

Dependent variable
Post × IO BR+BGI 13F Quintiles

OEF

0.2476
(0.57)
-0.0140
(-0.45)
0.0508***
(3.45)
-0.0060
(-0.21)
0.2259
(0.75)
0.0098
(1.16)
0.0381
(0.67)
0.1104***
(2.94)

9,852
0.35

(2)
-0.0020
(-0.40)

0.0141**
(2.12)
-0.0131*
(-1.65)
-0.0224*
(-1.95)
0.1743
0.3804
(0.58)
(0.49)
0.0031
0.0032
(0.14)
(0.10)
0.0299**
0.0964***
(2.50)
(4.30)
0.0138
-0.0090
(0.74)
(-0.31)
0.0632
0.0829
(0.40)
(0.25)
-0.0038
0.0035
(-0.65)
(0.33)
-0.0106
0.0564
(-0.32)
(0.88)
0.0672**
0.1409***
(2.39)
(3.34)
Controls × period indicators
Stock & period
9,840
9,852
0.30
0.37

IA.52

Electronic copy available at: https://ssrn.com/abstract=2641078

0.0033
(0.57)
-0.0014
(-0.19)
-0.0009
(-0.11)
-0.5350
(-1.06)
0.0124
(0.53)
0.0335*
(1.74)
0.0170
(0.83)
-0.0770
(-0.46)
-0.0019
(-0.30)
0.0031
(0.08)
0.1175***
(2.74)

9,840
0.32

Panel C: Daily abnormal stock returns around the antitrust approval date, panel regressions, treatment variable IO BR+BGI constructed from 13F
data, control variables from Compustat
Sample
Dependent variable: Daily
abnormal returns
IO BR+BGI 13F × [-5, -1]
IO BR+BGI 13F × [0, 1]
IO BR+BGI 13F × [2, 6]
IO BR+BGI 13F × [7, 20]
Total Residual IO Q. × [-5, -1]
Total Residual IO Q. × [0, 1]
Total Residual IO Q. × [2, 6]
Total Residual IO Q. × [7, 20]

WM-adj.
(1)
-0.4559
(-0.27)
-3.6137
(-1.68)
-1.2601
(-0.46)
-0.6850
(-0.41)
-0.0100
(-0.18)
-0.0438
(-1.10)
-0.0631
(-1.26)
-0.0182
(-0.46)

LM-adj.
(2)
-0.4651
(-0.27)
-4.1380**
(-2.30)
-0.9931
(-0.38)
-0.6620
(-0.40)
-0.0103
(-0.18)
-0.0481
(-1.23)
-0.0619
(-1.35)
-0.0186
(-0.48)

DGTW-adj.
(3)
0.0714
(0.04)
-5.1373***
(-3.08)
-1.8885
(-0.68)
-0.9186
(-0.51)
-0.0048
(-0.10)
-0.0134
(-0.21)
-0.0608*
(-1.69)
-0.0239
(-0.60)

Passive Res. IO Q. × [-5, -1]

Antitrust Approval [-20, 20]
WM-adj.
LM-adj.
DGTW-adj.
(4)
(5)
(6)
-1.2627
-1.1670
-0.5033
(-0.76)
(-0.80)
(-0.33)
-3.2783*
-2.1301
-2.9263*
(-1.73)
(-0.88)
(-1.73)
-0.1526
-0.5320
-1.5916
(-0.07)
(-0.24)
(-0.70)
-0.3649
-0.2996
-0.7488
(-0.25)
(-0.21)
(-0.46)

0.0260
(0.28)
-0.0611
(-1.31)
-0.1169
(-1.07)
-0.0335
(-0.74)

Passive Res. IO Q. × [0, 1]
Passive Res. IO Q. × [2, 6]
Passive Res. IO Q.× [7, 20]

0.0208
(0.26)
-0.1411*
(-1.90)
-0.0864
(-1.20)
-0.0359
(-0.83)

Active Res. IO Q.× [0, 1]
Active Res. IO Q. × [2, 6]
Active Res. IO Q.× [7, 20]

Fixed Effects
Observations
Adjusted R2

Controls, controls × event indicators,
country-specific turn of month & turn of
week effects
Stock & trading day
100,247
100,247
98,857
0.08
0.02
0.01

LM-adj.
(8)
-0.6651
(-0.35)
-5.2183***
(-3.10)
-1.7711
(-0.62)
-0.8625
(-0.52)

DGTW-adj.
(9)
-0.1043
(-0.06)
-5.8406***
(-3.18)
-2.6620
(-0.89)
-1.1939
(-0.64)

0.0210
(0.35)
-0.1138
(-1.11)
-0.0776
(-1.27)
-0.0327
(-0.73)

Active Res. IO Q. × [-5, -1]

Unreported

WM-adj.
(7)
-0.6344
(-0.33)
-4.4315**
(-2.07)
-2.1290
(-0.71)
-0.8743
(-0.51)

Controls, controls × event indicators,
country-specific turn of month & turn of
week effects
Stock & trading day
100,247
100,247
98,857
0.08
0.02
0.01

IA.53

Electronic copy available at: https://ssrn.com/abstract=2641078

-0.0030
-0.0023
0.0034
(-0.10)
(-0.07)
(0.09)
-0.0111
-0.0025
0.0208
(-0.31)
(-0.08)
(0.47)
-0.0324
-0.0358
-0.0344
(-0.72)
(-0.94)
(-1.00)
-0.0126
-0.0125
-0.0150
(-0.35)
(-0.39)
(-0.46)
Controls, controls × event indicators,
country-specific turn of month & turn of
week effects
Stock & trading day
100,247
100,247
98,857
0.08
0.02
0.01