Large Investors' Portfolio Composition and Firm Value

52 Pages Posted: 23 Mar 2018 Last revised: 30 Jan 2019

See all articles by S. Abraham Ravid

S. Abraham Ravid

Yeshiva University - Syms School of Business

Naciye Sekerci

Utrecht University - School of Economics; Lund University

Date Written: March 22, 2018

Abstract

We analyze new Swedish data on the portfolio holdings of large blockholders and find that firm value increases with the weight of a stock in a large blockholder’s portfolio. In our sample, this weight may be greater than 50%. We are the first to show that this value premium is correlated with portfolio weights for any large blockholders, not just institutions. We find some evidence that indicates that “stock importance” (high portfolio weight) can mitigate the negative effects of a dual-class structure on firm value. Further, it does not seem that a large blockholder’s tenure as a CEO or as a board chairman affects this value premium. We conduct a variety of tests to rule out endogeneity and reverse causality.

Keywords: stock importance, portfolio composition, block-holders, dual-class shares

JEL Classification: G30, G32, G39

Suggested Citation

Ravid, S. Abraham and Sekerci, Naciye, Large Investors' Portfolio Composition and Firm Value (March 22, 2018). Journal of Corporate Finance, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3146773 or http://dx.doi.org/10.2139/ssrn.3146773

S. Abraham Ravid (Contact Author)

Yeshiva University - Syms School of Business ( email )

United States

Naciye Sekerci

Utrecht University - School of Economics ( email )

Kriekenpitplein 21-22
Adam Smith Building
Utrecht, +31 30 253 7373 3584 EC
Netherlands

Lund University ( email )

Lund

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