Estimating the effects of large shareholders using a geographic instrument

Bo Becker, Henrik Cronqvist, Rüdiger Fahlenbrach

Research output: Contribution to journalArticlepeer-review

62 Scopus citations


Large shareholders may play an important role for firm performance and policies, but identifying this empirically presents a challenge due to the endogeneity of ownership structures. We develop and test an empirical framework that allows us to separate selection from treatment effects of large shareholders. Individual blockholders tend to hold blocks in public firms located close to where they reside. Using this empirical observation, we develop an instrument (the density of wealthy individuals near a firm's headquarters) for the presence of large, nonmanagerial individual shareholders in firms. These shareholders have a large impact on firms, controlling for selection effects.

Original languageEnglish (US)
Pages (from-to)907-942
Number of pages36
JournalJournal of Financial and Quantitative Analysis
Issue number4
StatePublished - Aug 2011
Externally publishedYes

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics


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