Large Shareholder Premium

25 Pages Posted: 19 Mar 2021

See all articles by Weihuan Huang

Weihuan Huang

School of Data Science, Fudan University; Zhongtai Institute for Financial Studies, Shandong University

Chenghu Ma

Fudan University

Yuhong Xu

Soochow university

Date Written: February 6, 2021


We develop a theoretical model to study investors' trading behavior in the presence of large shareholders' influence on a firm's equity. We show that, for a good stock, large shareholders may invest a higher proportion of their wealth in the firm than smart small investors, although they predict the same equity return. Insight is also cast into the impacts of board structure on the firm's equity when the firm possesses several large influential shareholders: (i) the large shareholders collude in trading, and each tends to invest more aggressively as other large shareholders do, and (ii) firms with sole ownership can outperform those with dispersed ownership, if the impact coefficient of the former case exceeds or coincides with the aggregated impact coefficients of the latter.

Keywords: large shareholder premium, mean variance, asset allocation, time inconsistency.

JEL Classification: G11, D81, G41, C73

Suggested Citation

Huang, Weihuan and Ma, Chenghu and Xu, Yuhong, Large Shareholder Premium (February 6, 2021). Available at SSRN: or

Weihuan Huang (Contact Author)

School of Data Science, Fudan University ( email )

Zibin Building, Handan Road 220
Shanghai, 200433

Zhongtai Institute for Financial Studies, Shandong University ( email )

27 Shanda South Road
Jinan, Shandong 250100

Chenghu Ma

Fudan University

Handan Road
Shanghai, 200433

Yuhong Xu

Soochow university ( email )

No. 1 Shizi Street
Suzhou, Jiangsu 215006


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