Open AccessComposition of blockholders in publicly traded firms
Author(s) -
Halil D. Kaya,
Nancy L. Lumpkin-Sowers
Publication year - 2017
Publication title -
corporate ownership and control
Language(s) - English
Resource type - Journals
eISSN - 1810-0368
pISSN - 1727-9232
DOI - 10.22495/cocv14i2art9
Subject(s) - recession , corporate governance , business , officer , accounting , stock (firearms) , monetary economics , finance , economics , mechanical engineering , political science , keynesian economics , law , engineering
The outside blockholder has become an important agent in the corporate governance literature in the United States. Understanding how his monitoring role changes as economic circumstances deteriorate is rarely considered. In this study, we examine whether the number of certain types of blockholders, as well as their ownership concentrations, will increase during recessions. By categorizing blockholders by type: affiliated, outside, employee (through Employee Stock Ownership Plans), non-officer director, and officer director, we are able to track how blockholder composition changed within firms when the economy moved from expansion in 1999 to recession in 2001. Using nonparametric tests, we show that the number of outside blockholders and their ownership stake go up during the recessionary period examined. This suggests a more important monitoring role for the outside blockholder when the economy worsens. Though we do not find a statistically significant change overall in the average number of blockholders or the total percentage of shares held across the firms in our sample for the other blockholder types when the economy moves from expansion to recession, we do see noteworthy changes in the behavior of the affiliated and ESOP blockholder at specific ownership concentration levels when the economy shifts.