SIFR Research Report Series, Institute for Financial Research
Large Shareholders and Corporate Policies
() and Rüdiger Fahlenbrach
Abstract: We develop an empirical framework that allows us to
analyze the effects of heterogeneity across large shareholders, using a new
blockholder-firm panel data set in which we can track all unique
blockholders among large public U.S. firms. We find statistically
significant and economically important blockholder fixed effects in
investment, financial, and executive compensation policies. This evidence
suggests that blockholders vary in their beliefs, skills, or preferences.
Different large shareholders have distinct investment and governance
styles: they differ in their approaches to corporate investment and growth,
their appetite for financial leverage, and their attitudes towards CEO pay.
We also find blockholder fixed effects in firm performance measures, and
differences in style are systematically related to firm performance
differences. Our results are consistent with influence for activist,
pension fund, corporate, individual, and private equity blockholders, hut
consistent with systematic selection for mutual funds. Finally, we analyze
sources of the heterogeneity, and find that blockholders with larger block
size, board membership, or direct management involvement as officers are
associated with larger effects on corporate policies and firm
Keywords: Large shareholders; blockholders; corporate policies; firm performance; (follow links to similar papers)
JEL-Codes: G31; G32; G34; G35; (follow links to similar papers)
49 pages, September 15, 2007
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