Is Blockholder Diversity Detrimental?

67 Pages Posted: 23 Jun 2020 Last revised: 27 Nov 2020

See all articles by Miriam Schwartz-Ziv

Miriam Schwartz-Ziv

Hebrew University of Jerusalem - Department of Finance and Banking

Ekaterina Volkova

University of Melbourne - Faculty of Business and Economics

Date Written: November 26, 2020

Abstract

We find, in three settings, that diversity among large shareholders (i.e., blockholders) is detrimental to firm performance. Specifically, we find that(1) disclosure of an increase in block diversity around an exogenously predetermined date is followed by a negative market reaction, while disclosure of a decrease in block diversity, due to (2) an individual’s death or retirement or (3) the 2003 mutual fund scandal, is followed by an increase in firm performance. We also show that firms held by a heterogeneous blockholder base consistently perform worse than firms held by homogeneous blockholders, and experience disagreement more frequently.

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? (November 26, 2020). 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

Ekaterina Volkova

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

Victoria, 3010
Australia

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