Do Small Shareholders Count?

48 Pages Posted: 15 Jun 2010

See all articles by Eugene Kandel

Eugene Kandel

Hebrew University of Jerusalem - Department of Economics; Centre for Economic Policy Research (CEPR)

Massimo Massa

INSEAD - Finance

Andrei Simonov

Michigan State University - Eli Broad Graduate School of Management; Russian Presidential Academy of National Economy and Public Administration (RANEPA); Centre for Economic Policy Research (CEPR)

Date Written: June 14, 2010

Abstract

We hypothesize that age similarity among small shareholders acts as an implicit coordinating device for their actions, and thus may represent an indirect source of corporate governance in firms with dispersed ownership. We test this hypothesis on a sample of Swedish firms during the 1995-2000 period. Consistent with our hypothesis, we find that compared to shareholders of differing ages, same-age non-controlling shareholders sell more aggressively following negative firm news; firms with more age-similar small shareholders are more profitable and command higher valuation; and an increase (decline) in a firm’s small shareholder age-similarity brings a significantly large increase (decline) in its stock price. The latter effects are more pronounced in the absence of a controlling shareholder.

Keywords: shareholder heterogeneity, firm value, corporate finance, and managerial decision making

JEL Classification: G30, G32

Suggested Citation

Kandel, Eugene and Massa, Massimo and Simonov, Andrei, Do Small Shareholders Count? (June 14, 2010). Available at SSRN: https://ssrn.com/abstract=1624823 or http://dx.doi.org/10.2139/ssrn.1624823

Eugene Kandel

Hebrew University of Jerusalem - Department of Economics ( email )

School of Business
Mount Scopus
Jerusalem 91905
Israel
+972 2 588 3137 (Phone)
+972 2 581 6071 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Massimo Massa

INSEAD - Finance ( email )

Boulevard de Constance
F-77305 Fontainebleau Cedex
France
+33 1 6072 4481 (Phone)
+33 1 6072 4045 (Fax)

Andrei Simonov (Contact Author)

Michigan State University - Eli Broad Graduate School of Management ( email )

645 N. Shaw Lane, 321 Eppley Center
East Lansing, MI 48824-1122
United States

HOME PAGE: http://www.andreisimonov.com

Russian Presidential Academy of National Economy and Public Administration (RANEPA) ( email )

Vernadskogo Prospect 82
Moscow, 119571
Russia

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

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