Changes in Institutional Ownership: Liquidity, Activism, and Firm Performance
49 Pages Posted: 15 Mar 2012 Last revised: 9 Oct 2013
Date Written: September 28, 2013
We document a negative (positive) relationship between firm performance and changes in the ownership of large (small) institutional investors. Small investors "exit'' while blockholders increase their holdings following poor performance. We find evidence that large investors increase ownership following poor performance to protect the value of initial holdings and to benefit from undertaking value-enhancing interventions. We observe that poorly performing firms in which blockholders increase their ownership experience more aggressive restructuring policies than firms in which blockholders reduce their ownership. Finally, we find that firms with passive investors recover faster than firms with active investors following poor performance.
JEL Classification: G30, G32, G34
Suggested Citation: Suggested Citation