Blockholder voting power and investment decisions: Evidence from cross-border deals in Latin America

This paper examines the relationship between blockholder coalitions and the probability of completing a cross-border merger and acquisition. Using different power indices based on Shapley-Shubik values for cooperative games for a sample of acquirers' firms from Latin America, our findings indicate an inverted-U-shaped relationship between the voting power of the largest blockholder and the likelihood of completing a cross-border deal. This relationship is strengthened by the number of active blockholders and the participation of institutional investors within coalitions among the top four blockholders, particularly pension fund administrators. Consequently, we observe that colluding blockholders in acquirer firms are more inclined to pursue risky cross-border acquisitions, but only when they possess relatively low levels of voting rights. Additionally, the study highlights a positive moderating effect of cross-border deals with coalition agreements on the long-term value performance of acquiring firms, suggesting that coalition agreements promote overseas acquisitions that enhance value. •This paper examines relationships between the top block holder's voting power coalitions and cross-border deal investment decisions.•The results confirm that blockholder coalitional value increases the likelihood of completing a CBD at levels below the mean values.•Results show that increasing the number of pension funds administrators strengthens the coalition effect on the likelihood of a CBD.•Increasing the number of hedge funds within the controlling coalition reduces the likelihood of a CBD, lowering corporate risk-taking levels.•Results confirm positive post-takeover long-term performance within the acquirer firms.