Large Investors’ Portfolio Composition and Firm Value

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This paper investigates the impact of block-holding from a new angle. New Swedish data shows that firm value increases with the weight of a stock in a large owner’s own portfolio. In Sweden this weight may be greater than 50%. We find some evidence suggesting that this “stock importance” (high portfolio weight) can mitigate the negative effects of a dual class structure on firm value. The identity of the block-holder, and if the block-holder is the CEO or the Chairman are not important for the premium. We conduct a variety of tests to rule out endogeneity and reverse causality.

Author(s):

Naciye Sekerci    
Utrecht University School of Economics
Netherlands

Abraham (Avri) Ravid    
Yeshiva University
United States