The Importance of Blockholder Heterogeneity: Security Market Effects and Follow-on Activities

71 Pages Posted: 29 Jan 2011 Last revised: 19 Oct 2017

See all articles by Jim Hsieh

Jim Hsieh

George Mason University

Tao-Hsien Dolly King

University of North Carolina (UNC) at Charlotte - Department of Finance

Date Written: October 17, 2017

Abstract

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

Hsieh, Jim and King, Tao-Hsien Dolly, The Importance of Blockholder Heterogeneity: Security Market Effects and Follow-on Activities (October 17, 2017). Available at SSRN: https://ssrn.com/abstract=1750403 or http://dx.doi.org/10.2139/ssrn.1750403

Jim Hsieh (Contact Author)

George Mason University ( email )

4400 University Dr, MSN 5F5
George Mason University
Fairfax, VA 22030
United States

Tao-Hsien Dolly King

University of North Carolina (UNC) at Charlotte - Department of Finance ( email )

9201 University City Boulevard
Charlotte, NC 28223
United States
704-687-7652 (Phone)
704-687-6987 (Fax)

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