Estimating the Effects of Large Shareholders Using a Geographic Instrument

Bo Becker, Henrik Cronqvist, Rüdiger Fahlenbrach

NBER Working Paper No. 17393
Issued in September 2011
NBER Program(s):   CF

Large shareholders may play an important role for firm performance and policies, but identifying this empirically presents a challenge due to the endogeneity of ownership structures. We develop and test an empirical framework which allows us to separate selection from treatment effects of large shareholders. Individual blockholders tend to hold blocks in public firms located close to where they reside. Using this empirical observation, we develop an instrument – the density of wealthy individuals near a firm’s headquarters – for the presence of a large, non-managerial individual shareholder in a firm. These shareholders have a large impact on firms, controlling for selection effects.

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Document Object Identifier (DOI): 10.3386/w17393

Published: Becker, Bo & Cronqvist, Henrik & Fahlenbrach, Rüdiger, 2011. "Estimating the Effects of Large Shareholders Using a Geographic Instrument," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 46(04), pages 907-942, September. citation courtesy of

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