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Large Blocks of Stock: Prevalence, Size, and Measurement

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  • Jennifer Dlugosz
  • Rudiger Fahlenbrach
  • Paul Gompers
  • Andrew Metrick

Abstract

Large blocks of stock play an important role in many studies of corporate governance and finance. Despite this important role, there is no standardized data set for these blocks, and the best available data source, Compact Disclosure, has many mistakes and biases. In this paper, we document these mistakes and show how to fix them. The mistakes and bias tend to increase with the level of reported blockholdings: in firms where Compact Disclosure reports that aggregate blockholdings are greater than 50 percent, these aggregate holdings are incorrect more than half the time and average holdings for these incorrect firms are overstated by almost 30 percentage points. We also demonstrate that our fixes are economically and statistically significant in an analysis of the relationship between firm value and outside blockholders.

Suggested Citation

  • Jennifer Dlugosz & Rudiger Fahlenbrach & Paul Gompers & Andrew Metrick, 2004. "Large Blocks of Stock: Prevalence, Size, and Measurement," NBER Working Papers 10671, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:10671 Note: CF AP
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    JEL classification:

    • G3 - Financial Economics - - Corporate Finance and Governance

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