Abstract
This study examines how changes in block ownership effects firm value and performance for a sample of US firms over the period 1993–2001. We find that the creation of a new block has a significant impact on shareholder wealth while block elimination does not. The wealth effect is most pronounced when the new block-holder is a corporation. We also determine that announcement period returns are larger when purchasers are classified as permanent rather than temporary block-holders. We find that the creation of a permanent block-holder improves industry-adjusted operating performance more than that of a temporary block-holder. Block elimination, however, does not impact the firm's subsequent operating performance. Our analysis of the sequencing of changes in the number of block-holders shows that firm value increases only when a block purchase produces an initial block-holder. We find that the superior long-term market performance of firms with new block-holders is due to the presence of permanent block-holders.