The effect of block ownership on future firm value and performance
The effect of block ownership on future firm value and performance
This paper examines the performance of the investment decisions of block owners. The block ownership data is obtained from Dlugosz, Fahlenbrach, Gompers, and Metrick (2006). We find that firm valuation (measured by Tobin's Q), operating performance (measured by changes in return on assets) and stock performance (measured by excess buy and hold returns) are positively and significantly related to the previous years' level of block ownership both in terms of the size of the ownership and the number of blockholders. Our results are robust to endogeneity concerns. Regarding whether a specific blockholder is an “insider” or an “outsider” to the firm, we find that the ownership of “outside” blockholders is a key determinant in explaining future firm performance. Note though that this category makes up about two-thirds of the aggregate amount of blockholding in Dlugosz et al. (2006) database, and also includes all blockholders not classified in other categories. In general, we attribute the superior performance to the presence of more blockholders. We also find an inverse association between the volatility in blockownership and the ex-post firm performance measures.
Block Ownership; Corporate Value; Financial Performance; Stock Return
Benamraoui, Abdelhafid
cab76a76-4275-4da9-9a09-7fc06eb3887e
Jory, Surendranath
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Mazouz, Khelifa
63a2f019-4618-4ab5-a777-1de03dc6f056
Shah, Neeta
f035322d-f029-4195-9460-ff237ce92320
Gough, Orla
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November 2019
Benamraoui, Abdelhafid
cab76a76-4275-4da9-9a09-7fc06eb3887e
Jory, Surendranath
2624eb24-850a-48f6-b3c6-c96749b87322
Mazouz, Khelifa
63a2f019-4618-4ab5-a777-1de03dc6f056
Shah, Neeta
f035322d-f029-4195-9460-ff237ce92320
Gough, Orla
7db56ba0-a0a1-4c7d-8d76-d71ff577dd9a
Benamraoui, Abdelhafid, Jory, Surendranath, Mazouz, Khelifa, Shah, Neeta and Gough, Orla
(2019)
The effect of block ownership on future firm value and performance.
The North American Journal of Economics and Finance, 50, [100982].
(doi:10.1016/j.najef.2019.04.025).
Abstract
This paper examines the performance of the investment decisions of block owners. The block ownership data is obtained from Dlugosz, Fahlenbrach, Gompers, and Metrick (2006). We find that firm valuation (measured by Tobin's Q), operating performance (measured by changes in return on assets) and stock performance (measured by excess buy and hold returns) are positively and significantly related to the previous years' level of block ownership both in terms of the size of the ownership and the number of blockholders. Our results are robust to endogeneity concerns. Regarding whether a specific blockholder is an “insider” or an “outsider” to the firm, we find that the ownership of “outside” blockholders is a key determinant in explaining future firm performance. Note though that this category makes up about two-thirds of the aggregate amount of blockholding in Dlugosz et al. (2006) database, and also includes all blockholders not classified in other categories. In general, we attribute the superior performance to the presence of more blockholders. We also find an inverse association between the volatility in blockownership and the ex-post firm performance measures.
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Accepted/In Press date: 24 April 2019
e-pub ahead of print date: 25 April 2019
Published date: November 2019
Keywords:
Block Ownership; Corporate Value; Financial Performance; Stock Return
Identifiers
Local EPrints ID: 430486
URI: http://eprints.soton.ac.uk/id/eprint/430486
ISSN: 1062-9408
PURE UUID: 7799b859-d1bc-4817-a7b7-2adb462407eb
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Date deposited: 02 May 2019 16:30
Last modified: 16 Mar 2024 07:48
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Contributors
Author:
Abdelhafid Benamraoui
Author:
Khelifa Mazouz
Author:
Neeta Shah
Author:
Orla Gough
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