Firm Value and External Blockholdings

FINANCIAL MANAGEMENT, Winter 1995

Posted: 7 Jul 1998

See all articles by Dilip K. Shome

Dilip K. Shome

Virginia Polytechnic Institute & State University - Pamplin College of Business

Sudhir Singh

Frostburg State University

Abstract

This paper examines the valuation consequences of external blockholdings. The stock market responses to announcement of block formations are positive, on average. Potential sources of gains to blockholders are identified, and the stock market responses are related cross-sectionally to firm-specific variables proxying for these sources and to blockholder-specific characteristics. The announcement period abnormal returns are explained by the potential for wealth transfer from bondholders, block size, and the identity of the blockholder. Changes in operating and performance variables following block formations provide weak evidence of hands-on monitoring by blockholders on an ongoing basis, suggesting that the observed value increases arise from expectations of future takeover gains and/or from limits on future opportunistic managerial behavior.

Note: 854

JEL Classification: L2

Suggested Citation

Shome, Dilip K. and Singh, Sudhir, Firm Value and External Blockholdings. FINANCIAL MANAGEMENT, Winter 1995, Available at SSRN: https://ssrn.com/abstract=7303

Dilip K. Shome (Contact Author)

Virginia Polytechnic Institute & State University - Pamplin College of Business ( email )

1016 Pamplin Hall
Blacksburg, VA 24061
United States
540-231-3607 (Phone)
540-231-3155 (Fax)

Sudhir Singh

Frostburg State University

Frostburg, MD 21532
United States

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Abstract Views
1,756
PlumX Metrics