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

Anup Agrawal and Tareque Nasser ()
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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

Quarterly Journal of Finance (QJF), 2018, vol. 08, issue 03, 1-59

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.

Keywords: Agency problems; corporate governance; boards of directors; blockholders; corporate policies; cash holdings; dividends; investment; financial leverage; firm risk; firm valuation (search for similar items in EconPapers)
Date: 2018
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Citations: View citations in EconPapers (4)

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DOI: 10.1142/S201013921850012X

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