Estimating the Effects of Large Shareholders Using a Geographic Instrument

58 Pages Posted: 21 Sep 2011 Last revised: 11 Jul 2024

See all articles by Bo Becker

Bo Becker

Stockholm School of Economics; Centre for Economic Policy Research (CEPR); ECGI

Henrik Cronqvist

Chapman University - The George L. Argyros College of Business and Economics

Rüdiger Fahlenbrach

École Polytechnique Fédérale de Lausanne (EPFL); Swiss Finance Institute; European Corporate Governance Institute (ECGI)

Multiple version iconThere are 2 versions of this paper

Date Written: September 2011

Abstract

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.

Suggested Citation

Becker, Bo and Cronqvist, Henrik and Fahlenbrach, Rüdiger, Estimating the Effects of Large Shareholders Using a Geographic Instrument (September 2011). NBER Working Paper No. w17393, Available at SSRN: https://ssrn.com/abstract=1931163

Bo Becker (Contact Author)

Stockholm School of Economics ( email )

Drottninggatan 98
Dept. of Finance
111 60 Stockholm, 11160
Sweden

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

ECGI ( email )

c/o the Royal Academies of Belgium
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1000 Brussels
Belgium

Henrik Cronqvist

Chapman University - The George L. Argyros College of Business and Economics ( email )

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Orange, CA 92866
United States

Rüdiger Fahlenbrach

École Polytechnique Fédérale de Lausanne (EPFL) ( email )

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Switzerland
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Swiss Finance Institute

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Switzerland

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

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