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Portfolio Concentration and Firm Performance

Author

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  • Ekholm, Anders
  • Maury, Benjamin

Abstract

This paper investigates the relation between shareholders’ portfolio concentration and firm performance. Using data on more than 1.3 million unique shareholders, we create an index that measures how concentrated shareholder portfolios are in each firm. We posit that portfolio concentration will affect incentives when shareholders are resource constrained. We find that average shareholder portfolio concentration is positively related to future operational performance and valuation. We also find that portfolio concentration is positively correlated with abnormal stock returns. Our findings suggest that shareholders with concentrated portfolios are more informed and play a governance role through the stock market.

Suggested Citation

  • Ekholm, Anders & Maury, Benjamin, 2014. "Portfolio Concentration and Firm Performance," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 49(4), pages 903-931, August.
    • Handle: RePEc:cup:jfinqa:v:49:y:2014:i:04:p:903-931_00
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    Cited by:

    1. Jankensgård, Håkan, 2018. "Between a rock and a hard place: New evidence on the relationship between ownership and voluntary disclosure," International Review of Financial Analysis, Elsevier, vol. 56(C), pages 281-291.
    2. Håkan Jankensgård & Anders Vilhelmsson, 2018. "The Shareholder Base Hypothesis of Stock Return Volatility: Empirical Evidence," Financial Management, Financial Management Association International, vol. 47(1), pages 55-79, March.
    3. Alam, Md. Mahmudul & Ibrahim, Yusnidah Bt & Mia, Shahin, 2020. "Climate Change Impacts on Yield and Financial Performance of Agro-Plantation Companies in Malaysia," SocArXiv m9ugw, Center for Open Science.
    4. Jianyu Zhao & Jing Qu & Lei Wang, 2023. "Heterogeneous institutional investors, environmental information disclosure and debt financing pressure," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 27(1), pages 253-296, March.
    5. Onur Kemal Tosun, 2020. "Differences in CEO compensation under large and small institutional ownership," European Financial Management, European Financial Management Association, vol. 26(4), pages 1031-1058, September.
    6. Marshall A. Geiger & Sami Keskek & Abdullah Kumas, 2022. "Trading concentration and industry-specific information: an analysis of auto complaints," Review of Quantitative Finance and Accounting, Springer, vol. 59(3), pages 913-937, October.
    7. Ravid, S. Abraham & Sekerci, Naciye, 2020. "Large investors’ portfolio composition and firms value," Journal of Corporate Finance, Elsevier, vol. 61(C).
    8. Edmans, Alex & Levit, Doron & Reilly, Devin, 2014. "Governance and Comovement Under Common Ownership," CEPR Discussion Papers 10119, C.E.P.R. Discussion Papers.
    9. LIN Kexin & KIMURA Yosuke & INOUE Kotaro, 2023. "Selection and Effects of Environmental and Social Engagement by Institutional Investors," Discussion papers 23091, Research Institute of Economy, Trade and Industry (RIETI).
    10. Edmans, Alex & Holderness, Clifford, 2016. "Blockholders: A Survey of Theory and Evidence," CEPR Discussion Papers 11442, C.E.P.R. Discussion Papers.
    11. Liu, Xianda & Hou, Wenxuan & Main, Brian G.M., 2024. "Military experience and subsequent effectiveness as a director," Journal of Economic Behavior & Organization, Elsevier, vol. 222(C), pages 144-176.
    12. Bajo, Emanuele & Croci, Ettore & Marinelli, Nicoletta, 2020. "Institutional investor networks and firm value," Journal of Business Research, Elsevier, vol. 112(C), pages 65-80.
    13. Jiawen Xu & Yixuan Li & Kai Liu & Tao Chen, 2023. "Portfolio selection: from under-diversification to concentration," Empirical Economics, Springer, vol. 64(4), pages 1539-1557, April.
    14. Axel R. Helling & Benjamin Maury & Eva Liljeblom, 2020. "Exit as governance: do blockholders affect corporate innovation in large US firms?," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 60(2), pages 1703-1725, June.

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