Equity Ownership, Agency Problems and Shareholder Wealth: Understanding the Unique Role of Corporate Block Owners

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AbstractAlthough nonfinancial corporations frequently purchase and own equity blocks in other nonfinancial corporations in both Europe (Dherment-Ferere et al. (2004), Kirchmaier and Grant (2005)) and the U.S. (Cronqvist and Fahlenbrach (2007)), remarkably little is known about the specific motives and consequences of corporate block purchases. Relative to other types of blockholders such as banks, individual investors or pension funds, corporations have several unique characteristics that give reason to a specific analysis of the motives and consequences of corporate block purchases.

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