Large blockholders and stock price crash risk: An international study

45 Pages Posted: 2 Aug 2019 Last revised: 10 Nov 2021

See all articles by Nicolas Eugster

Nicolas Eugster

University of Queensland - Business School

Jenny Wang

University of Queensland, Business School, Students

Date Written: November 22, 2021

Abstract

This study examines the relation between large blockholders and stock price crash risk across 44 countries. The results show that firms held by a large blockholder have a lower firm-specific crash risk than widely held firms and that the higher the proportion of voting rights, the lower is this risk. The results suggest that large shareholders serve as monitors in the company and reduce agency costs by improving investment efficiency, leading to lower stock price crash risk. Further analysis reveals that this mitigating effect is stronger in firms held by a family, another widely held corporation, and the state. By contrast, the results show no such effect in firms held by a large institutional investor. Last, the relation is more pronounced in developed countries and in English common law and German civil law countries, highlighting the role of large blockholders as a complementary governance mechanism rather than a substitutive one.

Keywords: Stock price crash risk, Large blockholder, Ownership structure, Agency costs, Monitoring

JEL Classification: G14, G30, G32, M40

Suggested Citation

Eugster, Nicolas and Wang, Jenny, Large blockholders and stock price crash risk: An international study (November 22, 2021). Available at SSRN: https://ssrn.com/abstract=3428929 or http://dx.doi.org/10.2139/ssrn.3428929

Nicolas Eugster (Contact Author)

University of Queensland - Business School ( email )

Brisbane, Queensland 4072
Australia

Jenny Wang

University of Queensland, Business School, Students ( email )

St Lucia
Australia

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
120
Abstract Views
810
rank
294,854
PlumX Metrics