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Corporate Financial and Investment Policies in the Presence of a Blockholder on the Board

Author

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  • Anup Agrawal

    (University of Alabama, Culverhouse College of Business, Tuscaloosa, AL 35487-0224, USA)

  • Tareque Nasser

    (2097 BB, 1301 Lovers Lane, College of Business Administration, Kansas State University, Manhattan, KS 66506, USA)

Abstract

We examine the relation between the presence of an independent director who is a blockholder (IDB) and corporate policies, risk-taking, and market valuation. After accounting for endogeneity, firms with an IDB have significantly (1) lower levels of cash holdings, payout and research and development (R&D) expenditures, (2) higher levels of capital expenditures, and (3) lower risk. The market appears to value IDB presence and the associated decrease in dividend yield. About 75% of the IDBs in our sample are individual investors, who drive most of our results. Our findings suggest that IDB presence plays a valuable role in shaping some corporate policies and allocating corporate resources.

Suggested Citation

  • Anup Agrawal & Tareque Nasser, 2018. "Corporate Financial and Investment Policies in the Presence of a Blockholder on the Board," Quarterly Journal of Finance (QJF), World Scientific Publishing Co. Pte. Ltd., vol. 8(03), pages 1-59, September.
    • Handle: RePEc:wsi:qjfxxx:v:08:y:2018:i:03:n:s201013921850012x
    DOI: 10.1142/S201013921850012X
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