Multiple Large Shareholders and Firm Value

Abstract

We present a model of the effects of having multiple large shareholders on the valuation of firms. Using a sample of Finnish listed firms over the period from 1993 to 2000, we show, consistent with the model, that a more equal distribution of the votes among large blockholders has a positive effect on firm value. This result is particularly strong in family-controlled firms suggesting that families (which typically have managerial or board representation) are more prone to private benefit extraction if they are not monitored by another strong blockholder. We also show that the relation between multiple blockholders and firm value significantly depends on the identity of these blockholders.

Keywords: Corporate governance, Ownership structure, Multiple blockholders, Firm value

JEL Classification: G32, G34