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Negotiated Block Trades and Corporate Control
Author(s) -
BARCLAY MICHAEL J.,
HOLDERNESS CLIFFORD G.
Publication year - 1991
Publication title -
the journal of finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 18.151
H-Index - 299
eISSN - 1540-6261
pISSN - 0022-1082
DOI - 10.1111/j.1540-6261.1991.tb03769.x
Subject(s) - stock (firearms) , business , block (permutation group theory) , control (management) , enterprise value , stock price , monetary economics , accounting , industrial organization , economics , management , mathematics , engineering , biology , geometry , series (stratigraphy) , mechanical engineering , paleontology
We identify negotiated trades of large‐percentage blocks of stock as corporate control transactions. When a block trades and the firm is not fully acquired, cumulative abnormal returns average 5.6%, and 33% of the chief executives are replaced within a year. Stock‐price increases are larger when control passes to the new blockholder, when management does not resist the blockholder's effort to influence corporate policy, and when the block purchaser eventually fully acquires the firm. These findings suggest that the specific skills and expertise of blockholders, and not just the concentration of ownership, are important determinants of firm value.