The Effect of Block Ownership on Future Firm Value and Performance

Benamraoui, A., Jory, S.R., Mazouz, K., Shah, N.S. and Gough, O. 2019. The Effect of Block Ownership on Future Firm Value and Performance. The North American Journal of Economics and Finance. 50, p. 100982 100982. https://doi.org/10.1016/j.najef.2019.04.025

TitleThe Effect of Block Ownership on Future Firm Value and Performance
TypeJournal article
AuthorsBenamraoui, A., Jory, S.R., Mazouz, K., Shah, N.S. and Gough, O.
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.

Article number100982
JournalThe North American Journal of Economics and Finance
Journal citation50, p. 100982
ISSN1062-9408
Year2019
PublisherElsevier
Accepted author manuscript
Digital Object Identifier (DOI)https://doi.org/10.1016/j.najef.2019.04.025
Publication dates
Published online25 Apr 2019
Published in printNov 2019
LicenseCC BY-NC-ND 4.0

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