Ownership Concentration, Corporate Control Activity, and Firm Value: Evidence from the Death of Inside Blockholders

Myron B. Slovin · Marie E. Sushka

195 citations0/0 files storedThe Journal of Finance

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Corporate Finance and Governance Financial Markets and Investment Strategies Family Business Performance and Succession

Abstract

ABSTRACT We analyze how ownership concentration affects firm value and control of public companies by examining effects of deaths of inside blockholders. We find shareholder wealth increases, ownership concentration falls, and extensive corporate control activity ensues. Share price responses are related to the deceased's equity stake. Control group holdings fall for two‐thirds of the firms due to either the estate's dispersal or inheritors selling stock. A majority of firms become targets of control bids: three‐quarters of bids are successful; one‐third are hostile. Our evidence is broadly consistent with Stulz's (1988) model of the relationship between ownership concentration and firm value.

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References

1976Theory of the firm: Managerial behavior, agency costs and ownership structure 1983Separation of Ownership and Control 1980Agency Problems and the Theory of the Firm 1988Management ownership and market valuation 1985The Structure of Corporate Ownership: Causes and Consequences 1990Additional evidence on equity ownership and corporate value 1983The market for corporate control 1984Two Agency-Cost Explanations of Dividends

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