The Cost of Multiple Large Shareholders

C. X. Cai; D. Hillier; Jun Wang

doi:10.1111/fima.12090

The Cost of Multiple Large Shareholders

C. X. Cai, D. Hillier, Jun Wang

School of Economics, Finance and Accounting

Research output: Contribution to journal › Article › peer-review

79 Citations (Scopus)

222 Downloads (Pure)

Abstract

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.Publisher statement: This is the peer reviewed version of the following article: Cai, C. X. , Hillier, D. and Wang, J. (2016) The Cost of Multiple Large Shareholders. Financial Management, volume 45 (2): 401-430, which has been published in final form at http://dx.doi.org/10.1111/fima.12090 This article may be used for non-commercial purposes in accordance with Wiley Terms and Conditions for Self-Archiving.

Original language	English
Pages (from-to)	401-430
Number of pages	30
Journal	Financial Management
Volume	45
Issue number	2
Early online date	27 Feb 2015
DOIs	https://doi.org/10.1111/fima.12090
Publication status	Published - 1 Sept 2016

Bibliographical note

This is the peer reviewed version of the following article: Cai, C. X. , Hillier, D. and Wang, J. (2016) The Cost of Multiple Large Shareholders. Financial Management, volume 45 (2): 401-430, which has been published in final form at http://dx.doi.org/10.1111/fima.12090 This article may be used for non-commercial purposes in accordance with Wiley Terms and Conditions for Self-Archiving.

Keywords

Multiple large shareholders
firm value
Tobin’s Q
Non-controlling large shareholders
monitoring
collusion

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10.1111/fima.12090

The Cost of Multiple Large Shareholders FM2015 Accepted ManualAccepted author manuscript, 1.36 MB

Jun Wang
- School of Economics, Finance and Accounting - Assistant Professor Academic
Person: Teaching and Research

Cite this

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title = "The Cost of Multiple Large Shareholders",

abstract = "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.Publisher statement: This is the peer reviewed version of the following article: Cai, C. X. , Hillier, D. and Wang, J. (2016) The Cost of Multiple Large Shareholders. Financial Management, volume 45 (2): 401-430, which has been published in final form at http://dx.doi.org/10.1111/fima.12090 This article may be used for non-commercial purposes in accordance with Wiley Terms and Conditions for Self-Archiving.",

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AB - 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.Publisher statement: This is the peer reviewed version of the following article: Cai, C. X. , Hillier, D. and Wang, J. (2016) The Cost of Multiple Large Shareholders. Financial Management, volume 45 (2): 401-430, which has been published in final form at http://dx.doi.org/10.1111/fima.12090 This article may be used for non-commercial purposes in accordance with Wiley Terms and Conditions for Self-Archiving.

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The Cost of Multiple Large Shareholders

Abstract

Bibliographical note

Keywords

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Jun Wang

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