Is Blockholder Diversity Detrimental?

67 Pages Posted: 23 Jun 2020 Last revised: 6 May 2021

See all articles by Miriam Schwartz-Ziv

Miriam Schwartz-Ziv

Hebrew University of Jerusalem - Department of Finance and Banking; ECGI (European Corporate Governance Institute)

Ekaterina Volkova

University of Melbourne - Faculty of Business and Economics

Date Written: May 6, 2021

Abstract

We find that diversity among large blockholders is detrimental to firm performance. Specifically, we show that lagged disclosure, on exogenous predetermined dates, revealing an increase in block diversity, is followed by a negative market reaction. Similarly, an unexpected decrease in block diversity, due to an individual’s death or retirement, or to the 2003 mutual fund scandal, is followed by an increase in firm performance. Overall, firms held by a heterogeneous blockholder base consistently perform worse than firms held by homogeneous blockholders. Disagreement among shareholders (e.g., as reflected in shareholder votes) increases when the blockholder base is diverse.

Data on blockholders (described in this study) can be obtained at: https://www.dropbox.com/s/yp2r7graixxus7r/Blocks.csv?dl=0

Keywords: Blockholders, Blocks, Block diversity, Financial performance, Lawsuits, Shareholder Votes

JEL Classification: G3

Suggested Citation

Schwartz-Ziv, Miriam and Volkova, Ekaterina, Is Blockholder Diversity Detrimental? (May 6, 2021). Available at SSRN: https://ssrn.com/abstract=3621939 or http://dx.doi.org/10.2139/ssrn.3621939

Miriam Schwartz-Ziv (Contact Author)

Hebrew University of Jerusalem - Department of Finance and Banking ( email )

Mount Scopus
Jerusalem, 91905
Israel

ECGI (European Corporate Governance Institute) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

Ekaterina Volkova

University of Melbourne - Faculty of Business and Economics ( email )

Victoria, 3010
Australia

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