Scandinavian Working Papers in Economics

Working Papers,
Copenhagen Business School, Department of Finance

No 1999-9: Does Ownership Matter? Evidence from Changes in Institutional and Strategic Investors' Equity Holdings

Robert Neumann and Torben Voetmann
Additional contact information
Robert Neumann: Department of Finance, Copenhagen Business School, Postal: Department of Finance, Copenhagen Business School, Solbjerg Plads 3, A5, DK-2000 Frederiksberg, Denmark
Torben Voetmann: Department of Finance, Copenhagen Business School, Postal: Department of Finance, Copenhagen Business School, Solbjerg Plads 3, A5, DK-2000 Frederiksberg, Denmark

Abstract: This paper analyzes the relationship between ownership structure and security performance. We use a unique data set that includes all of the announcements of changes in institutional and strategic investors' ownership in firms listed on the Copenhagen Stock Exchange in 1997. Using a piecewise linear model, we find a decrease in security performance after a threshold level of ownership. This indicates the maximization of the instit utional and strategic investors' entrenchment benefits, which result from actively exercising corporate governance. However, the choice of cutoff points affects the estimation and the robustness is not convincing. The results of analyzing changes in ownership structure reveal that the autocorrelation in security returns contributes with more than half of the abnormal return. This reflects the investors trading strategy: stocks that outperform (underperform) are sold (bought). Overall, these results indicate that the literature may ove restimate corporate governance as a value-added factor.

Keywords: Corporate Governance; Ownership Structure; Event Study; Piecewise Regression

JEL-codes: G14; G32

30 pages, August 1, 1999

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