Estimating the Effects of Large Shareholders Using a Geographic Instrument
Harvard Business School; National Bureau of Economic Research (NBER)
Claremont McKenna College - Robert Day School of Economics and Finance
Ecole Polytechnique Fédérale de Lausanne; Swiss Finance Institute
NBER Working Paper No. w17393
Large shareholders may play an important role for firm performance and policies, but identifying this empirically presents a challenge due to the endogeneity of ownership structures. We develop and test an empirical framework which allows us to separate selection from treatment effects of large shareholders. Individual blockholders tend to hold blocks in public firms located close to where they reside. Using this empirical observation, we develop an instrument – the density of wealthy individuals near a firm’s headquarters – for the presence of a large, non-managerial individual shareholder in a firm. These shareholders have a large impact on firms, controlling for selection effects.
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Number of Pages in PDF File: 58working papers series
Date posted: September 21, 2011
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