Large Investors' Portfolio Composition and Firm Value
52 Pages Posted: 23 Mar 2018 Last revised: 30 Jan 2019
Date Written: March 22, 2018
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: Suggested Citation