As a country's attitude toward egalitarianism increases, which means a societal preference for the equal as opposed to hierarchical treatment of individuals, the ownership of the public corporations in the country becomes more concentrated. This finding is robust to a wide range of specifications and methodologies. Once egalitarianism is accounted for, there is no evidence that other cultural attitudes, including trust and religion, or legal protections for public market investors, including those laws that figure prominently in the literature, are related to ownership concentration. One explanation for the robust association between egalitarianism and ownership concentration is that large shareholders are valuable when employees have strong legal rights.

Mandatory shareholder approval of equity issuances varies across and within countries. When shareholders approve issuances, average announcement returns are positive. When managers issue stock without shareholder approval, returns are negative and 4% lower. The closer the vote is to the issuance or the greater is the required plurality, the higher are the returns for public offers, rights offers, and private placements. When shareholder approval is required, rights offers predominate. When managers may issue stock without shareholder approval, public offers predominate. These findings suggest that agency problems affect equity issuances and challenge existing adverse selection, market timing, and signaling explanations.

This article offers evidence on the ownership concentration at a representative sample of U.S. public firms. Ninety-six percent of these firms have blockholders; these blockholders in aggregate own an average 39% of the common stock. The ownership of U.S. firms is similar to and by some measures more concentrated than the ownership of firms in other countries. These findings challenge current thinking on a number of issues, ranging from the nature of the agency conflict in domestic corporations to the relationship between ownership concentration and legal protections for investors around the world. The Author 2007. Published by Oxford University Press on behalf of The Society for Financial Studies. All rights reserved. For Permissions, please email: [email protected], Oxford University Press.

[This article offers evidence on the ownership concentration at a representative sample of U.S. public firms. Ninety-six percent of these firms have blockholders; these blockholders in aggregate own an average 39% of the common stock. The ownership of U.S. firms is similar to and by some measures more concentrated than the ownership of firms in other countries. These findings challenge current thinking on a number of issues, ranging from the nature of the agency conflict in domestic corporations to the relationship between ownership concentration and legal protections for investors around the world.]

Shareholder participation in valuable domestic rights offerings averages only 64%, which is considerably lower than previously asserted. This causes wealth transfers from nonparticipating to participating shareholders that average 7% of the offering. Wealth transfers are larger in nontransferable and bigger offerings. The stock market reacts more negatively to larger wealth transfers. Offerings with lower shareholder participation also fall short in raising publicly stated capital goals. Rights offerings are far more common in countries with institutional practices that limit nonparticipating shareholders’ wealth losses. These findings suggest that agency conflicts influence the use of rights offers.

We analyze the pricing of 63 block trades between 1978 and 1982 involving at least 5% of the common stock of NYSE or Amex corporations. These blocks are typically priced at substantial premiums to the post-announcement exchange price. We argue that the premiums, which average 20%, reflect private benefits that accrue exclusively to the blockholder because of his voting power. The premiums paid by both individual and corporate block purchasers increase with firm size, fractional ownership, and firm performance. Individuals pay larger premiums for firms with greater leverage, lower stock-return variance, and large cash holdings.

We analyze 114 NYSE- or AMEX-listed corporations with majority shareholders. Majority shareholders are approximately equally divided between corporations and individuals and are typically both directors and officers. When majority blocks trade, stock prices increase and there is substantial management turnover. Although majority shareholders are typically paid larger salaries than officers in diffusely held firms, the difference is small and of marginal significance. Investment policies, the frequency of corporate-control transactions, accounting return, and Tobin's Q are similar for majority-owned and diffusely held firms. Differences in these dimensions do emerge, however, between firms with corporate and individual majority shareholders.

Carl Icahn, Irwin Jacobs, Carl Lindner, David Murdock, Victor Posner, and the late Charles Bluhdorn are usually portrayed as corporate ‘raiders’. The evidence here, however, shows that between 1977 and 1982 when it was first announced that they had purchased stock in a given firm, stock prices on average increased significantly. The investors' activities in target firms for the two years following the initial stock purchase are likewise inconsistent with ‘raiding’. We discuss two hypotheses that are consistent with the evidence: first, these investors improve the management of target firms; second, they are systematically able to identify under-priced stocks.

We identify negotiated trades of large‐percentage blocks of stock as corporate control transactions. When a block trades and the firm is not fully acquired, cumulative abnormal returns average 5.6%, and 33% of the chief executives are replaced within a year. Stock‐price increases are larger when control passes to the new blockholder, when management does not resist the blockholder's effort to influence corporate policy, and when the block purchaser eventually fully acquires the firm. These findings suggest that the specific skills and expertise of blockholders, and not just the concentration of ownership, are important determinants of firm value.

We identify negotiated trades of large-percentage blocks of stock as corporate control transactions involving active investors.One year after a trade, stock prices of the firms whose shares are traded are 5.6% higher, and 45% of the chief executives have been replaced.Stock-price increases are larger when a firm performs poorly before the trade, and when management does not resist the blockholder.Even though such blocks often convey the right to choose managers and influence corporate policy, some blockholders eventually acquire the firm, suggesting that corporate control is broader than the right to choose managers.