2008, Large shareholders and corporate policies

Employing a new blockholder-firm panel data set in which we can track large shareholders across firms and over time, we find that firms ’ investment, financial, operational, and executive compensation policies vary with the particular blockholder present in a firm. The effects are strongest for activists, pension funds, and corporations, and weakest for banks, trusts, and money managers. We also find that large-shareholder fixed effects in corporate policies vary systematically with blockholder fixed effects in performance. Finally, we show that activists, pension funds, corporations, and private equity firms are more likely to influence firm policies, while mutual funds select firms based on their policies. The contribution of our paper is to show that heterogeneity in beliefs, skills, or risk preferences across large shareholders plays an important role for firms ’ policies and performance