Is Blockholder Diversity Detrimental?

76 Pages Posted: 23 Jun 2020 Last revised: 7 Aug 2023

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: August 6, 2023

Abstract

We find that blockholder diversity, i.e., the firm shareholder base including several different types of blocks, is detrimental to firm performance. We show that lagged disclosure, on exogenous predetermined dates, that reveals an increase in block diversity is followed by a negative market reaction. Firms held by heterogeneous blockholders consistently perform worse than firms held by homogeneous blockholders. Block diversity is particularly detrimental when uncertainty is high. Disagreement among shareholders (e.g., as reflected in the frequency of lawsuits being filed) increases when the blockholder base is diverse. We make our blockholder dataset public for the benefit of other researchers.
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Note: The direct link to the blockholder data we assemble is https://www.dropbox.com/s/pim9z3fyz1x5ag9/blockholders.csv?dl=0 and https://wrds-www.wharton.upenn.edu/pages/get-data/contributed-data-forms/blockholders-schwartz-ziv-volkova/ , and the codes for constructing the data are available at this link: https://github.com/volkovacodes/Block_Codes.

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? (August 6, 2023). 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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