Job Market Paper

Blockholder Diversity and Company Value

Abstract: According to my new and extensive data on all US public companies, the majority of them have multiple blockholders (large shareholders). These blockholders could differ along several characteristics even within one company. Diversity between blockholders within a firm could have a positive and synergistic impact on its value. Alternatively, conflicting objectives and interests may cause diversity to adversely impact company operations.To investigate the resulting impact of blockholders diversity on company value, I construct diversity measures reflecting their heterogeneity in identity, portfolio size and investment horizon. Using shocks from blockholder acquisitions of financial firms and unexpected increases in payouts they receive from other positions to identify the causality channel, I find that block diversity has a strong negative influence on company value and operations. This result is robust to a variety of specifications and to exclusion of different groups of blockholders. Additionally, simulated placebo tests reject alternative explanations related to other observed and unobserved characteristics of block ownership.

Additional Information:

• the following subpage provides more information regarding my collected data on US block ownership
• my github repository provides the scripts I've used to download and parse the data