Block Share Purchases and Corporate Performance

Dice Center for Research in Financial Economics Working Papers Series, 97-10

Posted: 26 May 1998

See all articles by Jennifer E. Bethel

Jennifer E. Bethel

Babson College

Julia Porter Liebeskind

University of Southern California - Management and Organization Department

Tim C. Opler

Credit Suisse First Boston

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Abstract

This paper investigates the causes and consequences of activist block share purchases in the 1980s. We find that activist investors were most likely to purchase large blocks of shares in highly diversified firms with poor profitability. Activists were not less likely to purchase blocks in firms with shark repellents and ESOPs. Activist block purchases were followed by increases in asset divestitures, decreases in mergers and acquisitions, and abnormal share price appreciation. Industry-adjusted operating profitability also rose. This evidence supports the view that the market for partial corporate control plays an important role in limiting agency costs in U.S. corporations.

JEL Classification: G31, G32, G34

Suggested Citation

Bethel, Jennifer and Porter Liebeskind, Julia and Opler, Tim C., Block Share Purchases and Corporate Performance. Dice Center for Research in Financial Economics Working Papers Series, 97-10, Available at SSRN: https://ssrn.com/abstract=50945

Jennifer Bethel

Babson College ( email )

Babson Park, MA 02457-0310
United States
781-239-5797 (Phone)
781-239-5004 (Fax)

HOME PAGE: http://faculty.babson.edu/bethel/

Julia Porter Liebeskind

University of Southern California - Management and Organization Department ( email )

Los Angeles, CA 90089
United States
(213) 740-0749 (Phone)
(213) 749-0541 (Fax)

Tim C. Opler (Contact Author)

Credit Suisse First Boston ( email )

11 Madison Avenue
Investment Banking Div., 23rd Flr
New York, NY 10010
United States
(212) 328-5313 (Phone)
(212) 448-3410 (Fax)

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