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The Cost of Multiple Large Shareholders
Author(s) -
Cai Charlie X,
Hillier David,
Wang Jun
Publication year - 2015
Publication title -
financial management
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.647
H-Index - 68
eISSN - 1755-053X
pISSN - 0046-3892
DOI - 10.1111/fima.12090
Subject(s) - shareholder , expropriation , endogeneity , incentive , business , monetary economics , value (mathematics) , shareholder value , econometrics , enterprise value , economics , financial economics , microeconomics , accounting , finance , corporate governance , statistics , market economy , mathematics
Previous research argues that large noncontrolling shareholders enhance firm value because they deter expropriation by the controlling shareholder. We propose that the conflicting incentives faced by large shareholders may induce a nonlinear relationship between the relative size of large shareholdings and firm value. Consistent with this prediction, we present evidence that there are costs to having a second (and third) largest shareholder, especially when the largest shareholdings are similar in size. Our results are robust to various relative size proxies, firm performance measures, model specifications, and potential endogeneity issues.