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The Importance of Blockholder Heterogeneity: Security Market Effects and Follow-On Activities

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  • Hsieh, Jim
  • King, Tao-Hsien Dolly

Abstract

Recent research on blockholders focuses on activist hedge funds and documents positive stock but negative bond returns. This study investigates the role of blockholder heterogeneity on security market effects and target firm follow-on activities across three important dimensions: identity, motive, and purchasing method. We show that target firms’ security returns and post-acquisition activities strongly correlate with blockholder heterogeneity. Further, bond returns are significantly positive for firms with blockholders’ debt-assistance motive while both stock and bond returns are significantly negative in private placements. Overall, our findings highlight the importance of blockholder heterogeneity on the valuation and performance consequences in block acquisitions.

Suggested Citation

  • Hsieh, Jim & King, Tao-Hsien Dolly, 2019. "The Importance of Blockholder Heterogeneity: Security Market Effects and Follow-On Activities," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 54(1), pages 101-153, February.
    • Handle: RePEc:cup:jfinqa:v:54:y:2019:i:01:p:101-153_00
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    Cited by:

    1. Ioannis V. Floros & Nandu J. Nagarajan & Shiva Sivaramakrishnan, 2020. "The certification role of insider participation in PIPEs," Review of Quantitative Finance and Accounting, Springer, vol. 54(4), pages 1417-1447, May.

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