Large Shareholders and Corporate Policies

50 Pages Posted: 16 Mar 2006 Last revised: 11 Sep 2008

See all articles by Henrik Cronqvist

Henrik Cronqvist

University of Miami - Department of Finance

Rüdiger Fahlenbrach

Ecole Polytechnique Fédérale de Lausanne; Swiss Finance Institute; European Corporate Governance Institute (ECGI)

Multiple version iconThere are 2 versions of this paper

Date Written: December 27, 2007


We develop an empirical framework that allows us to analyze the effects of heterogeneity across large shareholders, and we construct a new blockholder-firm panel data set in which we can track all unique blockholders among large U.S. public firms. We find statistically significant and economically important blockholder fixed effects in investment, financial, and executive compensation policies. This evidence suggests that blockholders vary in their beliefs, skills, or preferences. Different large shareholders have distinct investment and governance styles: they differ in their approaches to corporate investment and growth, their appetites for financial leverage, and their attitudes towards CEO pay. We also find blockholder fixed effects in firm performance measures, and differences in style are systematically related to firm performance differences. Our results are consistent with influence for activist, pension fund,corporate, individual, and private equity blockholders, but consistent with systematic selection for mutual funds. Finally, we analyze sources of the heterogeneity, and find that blockholders with a larger block size, board membership, direct management involvement as officers, or with a single decision maker are associated with larger effects on corporate policies and firm performance.

Keywords: Large shareholders, blockholders, corporate policies, firm performance

JEL Classification: G31, G32, G34, G35

Suggested Citation

Cronqvist, Henrik and Fahlenbrach, Rüdiger, Large Shareholders and Corporate Policies (December 27, 2007). AFA 2007 Chicago Meetings Paper, Review of Financial Studies, Forthcoming, Fisher College of Business Working Paper No. 2006-03-004, EFA 2007 Ljubljana Meetings Paper, Charles A. Dice Center Working Paper No. 2006-14, Available at SSRN:

Henrik Cronqvist (Contact Author)

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Rüdiger Fahlenbrach

Ecole Polytechnique Fédérale de Lausanne ( email )

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