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The impact of private benefits on institutional ownership change: evidence from markets with different sentiments

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  • Yong Wang

Abstract

This study investigates the relationship between private benefits and institutional ownership change in markets characterized by different investors’ sentiments. High-sentiment markets tend to overvalue a firm and thereby offer institutional investors a chance to sell shares and profit from overvaluation by forgoing the private benefits otherwise obtainable. Empirical analysis of ownership data from 1990 to 2008 reveals that, in high-sentiment markets, institutional investors sell more shares low in private benefits (dual-class firm share) than shares high in private benefits (non-dual-class firm share). In contrast, firm insiders, who consume significant private benefits in both dual-class and non-dual class firms, sell more dual-class firm shares in both high- and low-sentiment markets. Their ownership disposition is more likely driven by the need for diversification. Subsample analyses show that public pension funds drive the market-sentiment-related change of institutional ownership. Copyright Springer Science+Business Media, LLC 2014

Suggested Citation

  • Yong Wang, 2014. "The impact of private benefits on institutional ownership change: evidence from markets with different sentiments," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 38(4), pages 609-626, October.
    • Handle: RePEc:spr:jecfin:v:38:y:2014:i:4:p:609-626
    DOI: 10.1007/s12197-012-9235-x
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    More about this item

    Keywords

    Institutional Ownership; Private Benefits; Market Sentiment; Public Pension Fund; G23; G32; G39;
    All these keywords.

    JEL classification:

    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G39 - Financial Economics - - Corporate Finance and Governance - - - Other

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