The Importance of Blockholder Heterogeneity: Security Market Effects and Follow-on Activities
71 Pages Posted: 29 Jan 2011 Last revised: 19 Oct 2017
Date Written: October 17, 2017
Recent research on blockholders focuses on activist hedge funds and documents positive stock but negative bond returns. This study investigates the role of blockholder heterogeneity on security market effects and target firm follow-on activities across three important dimensions: identity, motive, and purchasing method. We show that target firms’ security returns and post-acquisition activities strongly correlate with blockholder heterogeneity. Further, bond returns are significantly positive for firms with blockholders’ debt-assistance motive while both stock and bond returns are significantly negative in private placements. Overall, our findings highlight the importance of blockholder heterogeneity on the valuation and performance consequences in block acquisitions.
Keywords: blockholder; stockholder wealth; bondholder wealth; block trade; private placement
JEL Classification: G34, G14, G12
Suggested Citation: Suggested Citation